**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM 10-K**

**(Mark One)**
| **x**      | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**     |
|------------|-----------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                    |
| ** ** | **For the  fiscal year ended December 31, 2006**                                              |
| ** ** | ** **                                                                                    |
| ** ** | **OR**                                                                                        |
| ** ** | ** **                                                                                    |
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Commission file number 001-33274**

**TRAVELCENTERS OF AMERICA LLC**

(Exact Name of Registrant as Specified in Its Charter)

| **Delaware**             |   | **20-5701514**                     |
|--------------------------|--------|------------------------------------|
| (State of  organization) |   | (IRS Employer  Identification No.) |

 

**24601 Center Ridge Road, Suite 200,  Westlake, OH 44145-5639**

(Address of PrincipalExecutive Offices)

**(440)808-9100**

(Registrant’s Telephone Number, Including Area Code)

**Securities registered pursuant to Section 12(b) ofthe Act:**
| Title of each class | ** ** | **Name of each exchange on which registered** |
|---------------------|------------|-----------------------------------------------|
| Common Shares       |       | American Stock  Exchange                      |

 

Securities to be registered pursuant to Section 12(g) of the Act:  **None**

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.  x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the ExchangeAct.  (Check One):   Large Accelerated Filer o                      Accelerated Filer  o                    Non –Accelerated Filer  x

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o No x

On June 30, 2006, the registrant’s common shares were not publiclytraded.

Number of the registrant’s common shares outstanding as of March 15,2007: 8,808,575.065

In this Annual Report on Form 10-K, the terms “TA”, “TravelCenters”,the “Company”, “we”, “us” and “our” include TravelCenters of America LLC, andits consolidated subsidiaries, unless the context indicates otherwise.

**DOCUMENTS INCORPORATED BYREFERENCE**

None.

 

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**WARNING CONCERNING FORWARDLOOKING STATEMENTS**

OUR ANNUAL REPORT ON FORM 10-K CONTAINSFORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIESLITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.  ALSO, WHENEVER WE USE WORDS SUCH AS“BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAREXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS ARE BASEDUPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTSARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFERMATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTSAS A RESULT OF VARIOUS FACTORS. IMPORTANT FACTORS THAT COULD CAUSE ACTUALRESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD LOOKING STATEMENTS INCLUDE:

·      OUR ABILITY TO MANAGE EFFFECTIVELY THE TRAVEL CENTERS THATCOMPRISE OUR NETWORK;

·      OUR ABILITY TO OPERATE AS A PUBLIC COMPANY;

·      OUR ABILITY TO GENERATE CASH FLOW IN EXCESS OF OUR RENT TOHOSPITALITY PROPERTIES TRUST AND OUR OTHER EXPENSES;

·      OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED EMPLOYEES;

·      OUR ABILITY TO PROCURE SUFFICIENT FUEL TO SUPPLY OUR CUSTOMERS;

·      OUR POLICIES AND PLANS REGARDING OPERATIONS, ACQUISITIONS,DEVELOPMENT ACTIVITIES, FINANCING, LITIGATION AND OTHER MATTERS;

·      OUR ABILITY TO ACCESS CAPITAL MARKETS AND OTHER SOURCES OFFUNDS;

·      COMPLIANCE WITH AND CHANGES TO REGULATIONS AND OTHER FACTORSAFFECTING THE FUEL MARKETING INDUSTRY;

·      COMPETITION IN THE TRAVEL CENTER INDUSTRY; AND

·      OTHER RISKS MAY ADVERSELY IMPACT US, ASDESCRIBED MORE FULLY UNDER “ITEM 1A. RISK FACTORS”.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE UNDERTAKE NO OBLIGATIONTO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEWINFORMATION, FUTURE EVENTS OR OTHERWISE. 

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**TRAVELCENTERS OF AMERICA LLC**

**2006 FORM 10-K ANNUAL REPORT**

**Table of Contents**
|                | ** **                                                                                       | **Page** |
|----------------|--------------------------------------------------------------------------------------------------|----------|
| PART I         |                                                                                             |
|           |                                                                                             |     |
| Item  1.       | Business                                                                                         | 4        |
| Item  1A.      | Risk  Factors                                                                                    | 20       |
| Item  2.       | Properties                                                                                       | 24       |
| Item 3.        | Legal Proceedings                                                                                | 24       |
| Item 4.        | Submission  of Matters to a Vote of Security Holders                                             | 25       |
|           |                                                                                             |     |
| PART II        |                                                                                             |
|           |                                                                                             |     |
| Item 5.        | Market for  Our Common Equity and Related Stockholder Matters                                    | 25       |
| Item 6.        | Selected Financial  Data                                                                         | 26       |
| Item 7.        | Management’s  Discussion and Analysis of Financial Condition and Results of Operations      | 27       |
| Item 7A.       | Quantitative  and Qualitative Disclosures About Market Risk                                      | 39       |
| Item 8.        | Financial  Statements and Supplementary Data                                                     | 39       |
| Item 9.        | Changes in  and Disagreements With Accountants                                                   | 39       |
| Item 9A.       | Controls and  Procedures                                                                         | 40       |
| Item 9B.       | Other Information                                                                                | 40       |
|           |                                                                                             |     |
| PART III       |                                                                                             |
|           |                                                                                             |     |
| Item 10.       | Directors,  Executive Officers and Corporate Governance                                          | 40       |
| Item 11.       | Executive  Compensation                                                                          | 45       |
| Item 12.       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 52       |
| Item 13.       | Certain  Relationships and Related Transactions, and Director Independence                       | 54       |
| Item 14.       | Principal  Accountant Fees and Services                                                          | 57       |
|           |                                                                                             |     |
| PART IV        |                                                                                             |
|           |                                                                                             |     |
| Item 15.       | Exhibits and  Financial Statement Schedules                                                      | 58       |
|           |                                                                                             |     |
| **SIGNATURES** |                                                                                             |     |

 

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**PART I**

**Item 1.**  ***Business***

**General**

We are a limited liability company formed underDelaware law on October 10, 2006, as a wholly owned subsidiary ofHospitality Properties Trust, or Hospitality Trust, in connection withHospitality Trust’s planned acquisition of TravelCenters of America, Inc., thatwas completed on January 31, 2007. Our initial capitalization in a nominalamount was provided by Hospitality Trust on our formation date. From that timethrough January 31, 2007, we conducted no business activities. As described inmore detail elsewhere in this Annual Report on Form 10-K, on January 31, 2007Hospitality Trust acquired TravelCenters of America, Inc., restructuredthis acquired business and distributed all of our common shares to theshareholders of Hospitality Trust. Our business includes all of the assets ofTravelCenters of America, Inc. not retained by Hospitality Trust, theright and obligation to lease and operate the travel centers retained byHospitality Trust and cash that Hospitality Trust contributed to us prior tothe spin off.

**Business Overview**

We operate and franchise travel centers primarilyalong the U.S. interstate highway system. Our customers include long haultrucking fleets and their drivers, independent truck drivers and motorists. AtMarch 15, 2007, our geographically diversified network included 164 travelcenters located in 40 states in the U.S. and the province of Ontario, Canada.Many of our travel centers were originally developed more than 25 years agowhen prime real estate locations along the interstate highway system were morereadily available than they are today, a factor which we believe would make itdifficult to replicate a network such as ours. We believe that our nationwidenetwork provides an advantage to long haul trucking fleets by enabling them toreduce the number of their suppliers by routing their trucks within our networkfrom coast to coast.

We offer a broad range of products and services,including diesel fuel and gasoline, truck repair and maintenance services, fullservice restaurants, more than 20 different brands of quick servicerestaurants, or QSRs, travel and convenience stores and other driver amenities.

The U.S. travel center and truck stop industry inwhich we operate consists of travel centers, truck stops, diesel fuel outletsand similar properties designed to meet the needs of long haul trucking fleetsand their drivers, independent truck drivers and motorists. We believe that thetravel center and truck stop industry is highly fragmented, with in excess of3,000 travel centers and truck stops located on or near highways nationwide.

**History of our Predecessor**

TravelCenters of America, Inc., or our predecessor,was formed in December 1992 by a group of institutional investors. InApril 1993 our predecessor acquired the travel center assets of UnocalCorporation, or Unocal. The Unocal network included 139 travel centers, ofwhich 95 were leased to third party operators, 42 were franchisee operated andtwo were operated by our predecessor. The Unocal network operated principallyas a fuel wholesaler and franchisor.

In December 1993 our predecessor acquired thetravel center assets of The British Petroleum Company plc., or BP. The BPnetwork included 38 company operated and six franchisee operated travelcenters. In contrast to the Unocal network, the BP network was principally anowner operator of travel centers.

In January 1997 our predecessor changed itsbusiness strategy to align the operation of the then 122 travel center Unocalnetwork and the then 49 travel center BP network into a single network operatedunder the “TravelCenters of America” and “TA” brand names.

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**Network Development**

Since 1997 a number of steps have increased theconsistency of our operations and, we believe, otherwise made our network moreattractive to our customers. From 1997 to March 15, 2007, we or ourpredecessor:

·     acquired50 travel centers, including three multi-property acquisitions of more than tentravel centers;

·     designed,developed and constructed six travel centers;

·     tookover the operations of 51 travel centers which were previously leased to thirdparties;

·     razedand rebuilt seven travel centers;

·     reducedthe net number of franchised travel centers by 22; and

·     soldor closed 41 travel centers which were duplicative or nonstrategic.

*Re-imaging Program.*   Beginning in 1997 our predecessorpursued a capital program to upgrade, rebrand and otherwise re-image our travelcenters. Through March 15, 2007, re-image projects have been completed at 40 ofour travel centers at an average investment of $2.1 million each. Thesere-image projects typically include the addition of standardized architecturalfeatures to building facades, expansion of the area of travel and conveniencestores, addition of a food court with two or three QSRs, renovation of showersand restrooms and updates to our full service restaurants. Also, through March15, 2007, smaller scale re-image projects, which typically do not involveexpansion of the building or addition of a food court, at another 78 travelcenters have been completed at an average cost of $0.3 million each.

*Freightliner Agreement.*   In 1999 our predecessor entered anagreement with Freightliner LLC, a DaimlerChrysler company. Freightliner is aleading manufacturer of heavy trucks in North America. We are an authorizedprovider of repair work and specified warranty repairs to Freightliner’scustomers through the Freightliner ServicePoint® program. Our truck maintenanceand repair facilities are part of Freightliner’s 24 hour customer assistancedatabase for emergency and roadside repair referrals and we have access toFreightliner’s parts distribution, service and technical information systems.

*Maintenance and Repair CapacityExpansion Program.*  Beginning in 2004 our predecessor built additional truckmaintenance and repair bays at existing travel centers in our network. Webelieve that additional maintenance and repair bays increase our revenuegenerating capacity by increasing productivity and reducing customer waittimes. The number of our maintenance and repair bays has increased since 2004by over 120 bays to over 630 bays at March 15, 2007.

**Our Growth Strategy**

*Expansion through Organic Growth.*   We plan to continue the standardizationof our travel centers and to increase the services we offer to attractprofessional truck drivers and motorists. We have identified eight additionaltravel centers that we operate that we intend to re-image and one travel centerwhich we intend to raze and rebuild over the next two to three years. We havealso identified travel centers at which we believe we can add 40 maintenanceand repair bays during that same time period. We believe that we have otheropportunities to increase our revenues, including, but not limited to, theexpansion of the number of gasoline lanes at several of our travel centers toincrease the number of gasoline customers serviced simultaneously, continuedinvestment in our capital improvement program to keep our properties efficientand attractive to customers and continuing our customer loyalty and customersatisfaction programs.

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*Expansion through Acquisition.*   There are segments along the U.S. andCanadian interstate highway system that we consider to be strategic but wherewe do not have an adequate presence. We believe that our existing networkaffords us the opportunity to make acquisitions of travel centers that maybenefit from becoming part of our network, and we intend to pursue suchacquisitions. Our predecessor purchased a travel center in Illinois in November2006 and converted it to the TA brand. We regularly evaluate opportunities toexpand our network through acquisitions, some of which may be significant insize.

*Expansion through Development.*   We plan to continue expansion of ournetwork by building new travel centers. We have developed a “prototype” designand a smaller “protolite” design to standardize new travel centers. Since 1999we or our predecessor have constructed seven travel centers in the prototypedesign and six travel centers in the protolite design. Our prototype design isgenerally appropriate for markets in which we can obtain large parcels of landand which have sufficient demand to support a full service restaurant. Both theprototype and protolite designs include nationally branded QSRs, the keydifferences in the two designs being that the prototype design includes arestaurant and a larger truck parking area while the Protolite design does nothave a restaurant and has a smaller truck parking area. As a result, ourprotolite design requires significantly less land and enables us to establish apresence in certain markets at lower costs. Most of our existing travel centers are akin to the prototype design inthat they contain a restaurant and are on larger parcels of land with largertruck parking areas.  In March 2007, weopened a newly built protolite travel center in Livingston, CA.  As of March 15, 2007, we are developing aprototype travel center in Laredo, TX, which we expect to open during 2007.

*Expansion through Franchising.*   At some locations, we may find thatopportunities to expand our network are not available to us as development oracquisition opportunities. In those cases, we may seek to expand our franchiseenetwork.

**Our Network**

At March 15, 2007, our network consisted of:

·     136travel centers leased from Hospitality Trust and operated by us;

·     tentravel centers leased from Hospitality Trust and subleased to and operated byour franchisees;

·     twotravel centers we operate on sites we own;

·     threetravel centers that we operate on sites owned by parties other than HospitalityTrust; and

·     13travel centers that are owned and operated by our franchisees.

Our typical travel center contains:

·     over20 acres of land with parking for 170 tractor trailers and 100 cars;

·     a150 seat, full service restaurant and one to three QSRs that we operate as afranchisee under various brands;

·     atruck repair facility and parts store;

·     multiplediesel and gasoline fueling points; and

·     atravel and convenience store, game room, lounge and other amenities forprofessional truck drivers and motorists.

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In addition, some of our travel centers include ahotel.

Our travel centers are designed to appeal to driverswhether they seek a quick stop or a more extended visit. Substantially all ofour travel centers are full service sites located on or near an interstatehighway and offer fuel and non-fuel products and services 24 hours perday, 365 days per year.

*Properties.*  The physical layouts of the travel centers in our network vary fromsite to site. The majority of the developed acreage at our travel centersconsists of truck and car fuel islands, separate truck and car parking lots, amain building, which contains a full service restaurant and one or more QSRs, atravel and convenience store, a truck maintenance and repair shop and otheramenities.

*Product and Service Offering.*  We offer diverse products and services to complement our dieselfuel business, including:

·               *Gasoline.*  We sell branded and unbranded gasoline. Of the 164 travel centersin our network as of March 15, 2007, we offer branded gasoline at 104 travelcenters and unbranded gasoline at 46 travel centers. Only 14 of our travelcenters do not sell gasoline.

·               *FullService Restaurants and QSRs.*   Most of our travel centershave both full service restaurants and QSRs that offer customers a wide varietyof nationally recognized branded food choices. The substantial majority of ourfull service restaurants are operated under the “Country Pride®,” “BuckhornFamily Restaurants®” and “Fork in the Road®” brands, which we have the right touse under our Hospitality Trust lease, and offer menu table service andbuffets. We also offer more than 20 different brands of QSRs, including Arby’s®,Burger King®, Pizza Hut®, Popeye’s Chicken & Biscuits®, Starbuck’sCoffee®, Subway® and Taco Bell®. As of March 15, 2007, 150 of our travelcenters included a full service restaurant, 113 of our travel centers offeredat least one branded QSR and there were a total of 223 QSRs in our network. Therestaurants and QSRs in travel centers we operate are staffed by our employees.

·               *Truck Repair and Maintenance Shops.*  All but four of our network travel centers have truck repair andmaintenance shops. The typical repair and maintenance shop has between two andsix service bays and a parts storage room and is staffed by our mechanics.These shops generally operate 24 hours per day, 365 days per year,and offer extensive maintenance and emergency repair and road services, rangingfrom basic services such as oil changes and tire repair to specialty servicessuch as diagnostics and repair of air conditioning, air brake and electricalsystems. Our work is backed by a warranty honored at all of our repair andmaintenance facilities. As described above, our truck repair and maintenancefacilities provide certain warranty work on Freightliner brand trucks throughour participation in the Freightliner ServicePoint® program.

·               *Traveland Convenience Stores.*   Each of our travel centers has atravel and convenience store which offers merchandise to truck drivers,motorists, recreational vehicle operators and bus drivers and passengers. Eachtravel and convenience store has a selection of over 4,000 items, includingfood and snack items, beverages, non-prescription drug and beauty aids, batteries,automobile accessories, and music and video products. In addition to completetravel and convenience store offerings, the stores sell items specificallydesigned for the truck driver’s on the road lifestyle, including laundrysupplies, clothing and truck accessories. Most of our stores also have a “to go”snack bar as an additional food offering.

·               *AdditionalDriver Services.*   We believe that trucking fleets canimprove the retention and recruitment of truck drivers by directing them tovisit high quality, full service travel centers. We strive to provide aconsistently high level of service and amenities to professional truck driversat all of our travel centers, making our network an attractive choice fortrucking fleets. Most of our travel centers provide truck drivers with accessto specialized business services, including an information center where driverscan send

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and receive faxes,overnight mail and other communications and a banking desk where drivers cancash checks and receive funds transfers from fleet operators. The typicaltravel center also has a video game room, a laundry area with washers anddryers, private shower areas and areas designated for truck drivers only,including a television room with a video player and comfortable seating.

·               *Marketing.*  We offer truck drivers a “loyal fueler” program, called theRoadKing Club SM , that is similar to the frequent flyerprograms offered by airlines. Drivers receive a point for each gallon of dieselfuel purchased and each dollar spent on selected non-fuel products andservices. These points can be redeemed for discounts on non-fuel products andservices at any of our travel centers. We publish a bi-monthly magazine called “RoadKing SM” whichincludes articles and advertising of interest to professional truck drivers.

·               *Hotels.*  Our network includes 21 travel centers that offer hotels with anaverage capacity of 38 rooms. Generally, these hotels are operated underfranchise contracts with nationally branded chains, including Days Inn®, HoJoInn®, Knight’s Inn®, Rodeway® and Travelodge®.

**Operations**

*Fuel.* We purchasediesel fuel from various suppliers at rates that fluctuate with market pricesand generally are reset daily, and we sell fuel to our customers at prices thatwe establish daily. By establishing supply relationships with an average offour to five alternate suppliers per location, we believe we are able toeffectively create competition for our purchases among various diesel fuelsuppliers on a daily basis. We also believe that purchasing arrangements withmultiple diesel fuel suppliers may help us avoid product outages during timesof diesel fuel supply disruptions. We have a single source of supply forgasoline at most of our travel centers that offer branded gasoline; our travelcenters selling unbranded gasoline generally purchase gasoline from multiplesources.

Generally our fuel purchases are delivered directlyfrom suppliers’ terminals to our travel centers. We do not contract to purchasesubstantial quantities of fuel to keep as inventory. We generally have lessthan three days of diesel fuel inventory at our travel centers. We are exposedto price increases and interruptions in supply. We believe our exposure tomarket price increases for diesel fuel is mitigated by the significantpercentage of our total diesel fuel sales volume that is sold under pricingformulas that are indexed to market prices, which reset daily. We do not engagein any fixed price fuel contracts with customers. We may engage, from time totime, in a minimal level of hedging of the price of our fuel purchases withfutures and other derivative instruments that primarily are traded on the NewYork Mercantile Exchange. We had no derivative instruments as of March 15,2007.

*Non-fuel products.*   We have many sources for the largevariety of non-fuel products that we sell. We have developed strategicrelationships with several suppliers of key non-fuel products, includingFreightliner LLC for truck parts, Bridgestone/Firestone Tire Sales Company fortruck tires and ExxonMobil for Mobil brand lubricants and oils. We believe thatour relationships with these and our other suppliers are satisfactory.

*Centralized purchasing anddistribution.*   Wemaintain a distribution center near Nashville, Tennessee with 85,000 squarefeet of space. Our distribution center distributes a variety of non-fuel andnon-perishable products to our travel center network using a combination ofcontract carriers and our fleet of trucks and trailers. We believe we realizecost savings by using our consolidated purchasing power to negotiate volumediscounts with our suppliers and that using our own national distributioncenter helps us control shipping charges.

**Our Travel Centers**

Our travel centers are geographically diversified,located in 40 states in the U.S. and in Ontario, Canada. The travel centers weoperate and their significant services and amenities are generally described inthe chart below (travel centers operated by our franchisees are shownseparately – see “– Relationships with Franchisees”.  The listed properties are owned byHospitality Trust and leased by us unless otherwise indicated.

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| **City**         | ** ** | **State** | ** ** | **Total  Acres** | ** ** | **Building  area** | ** ** | **Car  parking  spaces** | ** ** | **Truck  parking  spaces** | ** ** | **Gasoline** | ** ** | **# Diesel  lanes** | ** ** | **Store  sales  area** | ** ** | **Full service  restaurant** | ** ** | **Truck  repair  facility** | ** ** | **QSRs** | ** ** | **Hotel** | ** ** |
|------------------|------------|-----------|------------|------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|------------|--------------|------------|--------------------------|------------|------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------|------------|-----------|------------|
| Mobile           |       | AL        |       | 15               |       | 16,685             |       | 77                       |       | 89                         |       | ü       |       | 6                        |       | 1,722                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Tuscaloosa       |       | AL        |       | 15               |       | 28,619             |       | 140                      |       | 151                        |       | ü       |       | 10                       |       | 2,491                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Prescott         |       | AR        |       | 26               |       | 19,202             |       | 144                      |       | 292                        |       | ü       |       | 10                       |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| West Memphis     |       | AR        |       | 47               |       | 21,895             |       | 76                       |       | 170                        |       | ü       |       | 8                        |       | 2,660                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Eloy             |       | AZ        |       | 22               |       | 26,269             |       | 87                       |       | 234                        |       | ü       |       | 12                       |       | 2,820                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Kingman          |       | AZ        |       | 28               |       | 13,231             |       | 100                      |       | 115                        |       | ü       |       | 9                        |       | 2,100                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Tonopah          |       | AZ        |       | 53               |       | 21,475             |       | 80                       |       | 407                        |       | ü       |       | 12                       |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Willcox          |       | AZ        |       | 21               |       | 16,459             |       | 75                       |       | 229                        |       | ü       |       | 8                        |       | 2,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Barstow          |       | CA        |       | 25               |       | 24,654             |       | 122                      |       | 303                        |       | ü       |       | 16                       |       | 3,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Buttonwillow     |       | CA        |       | 16               |       | 13,880             |       | 129                      |       | 170                        |       | ü       |       | 7                        |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Coachella        |       | CA        |       | 17               |       | 30,458             |       | 140                      |       | 205                        |       | ü       |       | 12                       |       | 2,880                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Corning          |       | CA        |       | 24               |       | 20,945             |       | 54                       |       | 254                        |       | ü       |       | 14                       |       | 3,696                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Livingston(1)    |       | CA        |       | 11               |       | 24,000             |       | 128                      |       | 105                        |       | ü       |       | 6                        |       | 2,730                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Ontario East     |       | CA        |       | 32               |       | 32,696             |       | 132                      |       | 559                        |       |         |       | 16                       |       | 4,224                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Ontario West     |       | CA        |       | 35               |       | 23,893             |       | 76                       |       | 549                        |       | ü       |       | 10                       |       | 1,450                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Redding          |       | CA        |       | 20               |       | 17,853             |       | 87                       |       | 196                        |       | ü       |       | 10                       |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Santa Nella      |       | CA        |       | 23               |       | 12,904             |       | 100                      |       | 240                        |       | ü       |       | 8                        |       | 2,200                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Wheeler Ridge(2) |       | CA        |       | 20               |       | 20,514             |       | 111                      |       | 130                        |       | ü       |       | 8                        |       | 2,800                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Denver East      |       | CO        |       | 27               |       | 30,676             |       | 117                      |       | 224                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Denver West      |       | CO        |       | 13               |       | 12,660             |       | 40                       |       | 163                        |       | ü       |       | 7                        |       | 2,200                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Limon            |       | CO        |       | 11               |       | 16,906             |       | 60                       |       | 104                        |       | ü       |       | 12                       |       | 3,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Milldale         |       | CT        |       | 13               |       | 15,580             |       | 77                       |       | 145                        |       | ü       |       | 9                        |       | 2,153                  |       | ü                            |       | ü                      |       |     |       |      |       |
| New Haven        |       | CT        |       | 12               |       | 12,953             |       | 64                       |       | 170                        |       | ü       |       | 10                       |       | 3,000                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Willington       |       | CT        |       | 43               |       | 19,870             |       | 155                      |       | 240                        |       | ü       |       | 8                        |       | 2,696                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Marianna         |       | FL        |       | 32               |       | 18,028             |       | 105                      |       | 112                        |       | ü       |       | 9                        |       | 1,800                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Tampa            |       | FL        |       | 10               |       | 22,094             |       | 75                       |       | 158                        |       | ü       |       | 6                        |       | 2,500                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Vero Beach       |       | FL        |       | 28               |       | 16,579             |       | 88                       |       | 162                        |       | ü       |       | 8                        |       | 1,650                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Wildwood         |       | FL        |       | 23               |       | 24,022             |       | 100                      |       | 170                        |       | ü       |       | 10                       |       | 2,832                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Atlanta          |       | GA        |       | 18               |       | 24,180             |       | 128                      |       | 218                        |       |         |       | 10                       |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Brunswick(3)     |       | GA        |       | 28               |       | 15,000             |       | 91                       |       | 81                         |       |         |       | —                   |       | —                 |       |                              |       | ü                      |       |     |       |      |       |
| Cartersville     |       | GA        |       | 21               |       | 30,676             |       | 105                      |       | 212                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Commerce         |       | GA        |       | 13               |       | 14,238             |       | 80                       |       | 133                        |       | ü       |       | 8                        |       | 1,800                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Cordele(2)       |       | GA        |       | 29               |       | 52,198             |       | 90                       |       | 114                        |       | ü       |       | 12                       |       | 3,884                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Madison          |       | GA        |       | 12               |       | 16,446             |       | 105                      |       | 149                        |       | ü       |       | 7                        |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Savannah         |       | GA        |       | 20               |       | 15,773             |       | 80                       |       | 175                        |       | ü       |       | 7                        |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Council Bluffs   |       | IA        |       | 11               |       | 15,684             |       | 84                       |       | 78                         |       | ü       |       | 8                        |       | 2,150                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Boise            |       | ID        |       | 13               |       | 20,700             |       | 34                       |       | 95                         |       | ü       |       | 8                        |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Bloomington      |       | IL        |       | 19               |       | 14,261             |       | 95                       |       | 147                        |       |         |       | 8                        |       | 1,600                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Chicago North    |       | IL        |       | 63               |       | 26,400             |       | 105                      |       | 215                        |       | ü       |       | 10                       |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Effingham        |       | IL        |       | 13               |       | 30,397             |       | 127                      |       | 137                        |       | ü       |       | 11                       |       | 2,789                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Elgin            |       | IL        |       | 15               |       | 20,023             |       | 97                       |       | 92                         |       | ü       |       | 9                        |       | 3,120                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Mt Vernon        |       | IL        |       | 33               |       | 21,839             |       | 97                       |       | 169                        |       | ü       |       | 8                        |       | 2,900                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Troy             |       | IL        |       | 20               |       | 24,340             |       | 83                       |       | 87                         |       | ü       |       | 8                        |       | 2,440                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Gary             |       | IN        |       | 22               |       | 33,344             |       | 109                      |       | 318                        |       | ü       |       | 16                       |       | 2,102                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Lake Station     |       | IN        |       | 23               |       | 25,130             |       | 170                      |       | 252                        |       | ü       |       | 17                       |       | 2,896                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Porter           |       | IN        |       | 35               |       | 22,000             |       | 51                       |       | 212                        |       | ü       |       | 12                       |       | 2,330                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Seymour          |       | IN        |       | 16               |       | 15,807             |       | 55                       |       | 167                        |       | ü       |       | 9                        |       | 1,440                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Whitestown       |       | IN        |       | 39               |       | 12,953             |       | 96                       |       | 172                        |       | ü       |       | 8                        |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Florence         |       | KY        |       | 11               |       | 18,783             |       | 87                       |       | 123                        |       | ü       |       | 8                        |       | 2,600                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Walton           |       | KY        |       | 9                |       | 15,988             |       | 46                       |       | 99                         |       | ü       |       | 8                        |       | 2,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Lafayette        |       | LA        |       | 14               |       | 17,034             |       | 47                       |       | 94                         |       | ü       |       | 7                        |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Slidell          |       | LA        |       | 22               |       | 20,607             |       | 145                      |       | 159                        |       | ü       |       | 10                       |       | 2,200                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Tallulah         |       | LA        |       | 17               |       | 18,625             |       | 75                       |       | 135                        |       | ü       |       | 8                        |       | 2,500                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Baltimore        |       | MD        |       | 21               |       | 65,884             |       | 92                       |       | 181                        |       |         |       | 8                        |       | 3,500                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Elkton           |       | MD        |       | 30               |       | 21,576             |       | 125                      |       | 164                        |       | ü       |       | 10                       |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Jessup           |       | MD        |       | 25               |       | 88,889             |       | 100                      |       | 453                        |       |         |       | 10                       |       | 6,400                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Ann Arbor        |       | MI        |       | 32               |       | 18,477             |       | 90                       |       | 205                        |       | ü       |       | 10                       |       | 2,400                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Monroe           |       | MI        |       | 33               |       | 20,383             |       | 105                      |       | 156                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Saginaw          |       | MI        |       | 11               |       | 13,735             |       | 84                       |       | 70                         |       | ü       |       | 8                        |       | 1,800                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Sawyer           |       | MI        |       | 23               |       | 27,920             |       | 100                      |       | 140                        |       | ü       |       | 12                       |       | 3,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Rogers           |       | MN        |       | 12               |       | 17,291             |       | 93                       |       | 150                        |       | ü       |       | 8                        |       | 1,950                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Concordia        |       | MO        |       | 20               |       | 24,200             |       | 100                      |       | 146                        |       | ü       |       | 10                       |       | 2,365                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Foristell        |       | MO        |       | 17               |       | 14,162             |       | 111                      |       | 95                         |       | ü       |       | 8                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Matthews         |       | MO        |       | 29               |       | 16,815             |       | 62                       |       | 114                        |       | ü       |       | 8                        |       | 1,920                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Oak Grove        |       | MO        |       | 15               |       | 19,777             |       | 97                       |       | 132                        |       | ü       |       | 10                       |       | 2,900                  |       | ü                            |       | ü                      |       | ü   |       |      |       |

 

9

----

 
| **City**            | ** ** | **State** | ** ** | **Total  Acres** | ** ** | **Building  area** | ** ** | **Car  parking  spaces** | ** ** | **Truck  parking  spaces** | ** ** | **Gasoline** | ** ** | **# Diesel  lanes** | ** ** | **Store  sales  area** | ** ** | **Full service  restaurant** | ** ** | **Truck  repair  facility** | ** ** | **QSRs** | ** ** | **Hotel** | ** ** |
|---------------------|------------|-----------|------------|------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|------------|--------------|------------|--------------------------|------------|------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------|------------|-----------|------------|
| Meridian            |       | MS        |       | 13               |       | 17,330             |       | 41                       |       | 90                         |       | ü       |       | 8                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Candler             |       | NC        |       | 20               |       | 12,853             |       | 45                       |       | 98                         |       | ü       |       | 8                        |       | 1,536                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Greensboro          |       | NC        |       | 29               |       | 29,508             |       | 122                      |       | 186                        |       | ü       |       | 12                       |       | 2,798                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Grand Island        |       | NE        |       | 19               |       | 19,223             |       | 64                       |       | 82                         |       | ü       |       | 6                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Ogallala            |       | NE        |       | 17               |       | 17,594             |       | 72                       |       | 94                         |       | ü       |       | 8                        |       | 2,516                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Greenland           |       | NH        |       | 7                |       | 17,361             |       | 33                       |       | 105                        |       | ü       |       | 9                        |       | 2,646                  |       | ü                            |       |                        |       |     |       |      |       |
| Bloomsbury          |       | NJ        |       | 13               |       | 23,660             |       | 96                       |       | 129                        |       | ü       |       | 10                       |       | 2,840                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Columbia            |       | NJ        |       | 16               |       | 17,573             |       | 90                       |       | 185                        |       | ü       |       | 11                       |       | 2,472                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Paulsboro           |       | NJ        |       | 25               |       | 19,206             |       | 44                       |       | 175                        |       | ü       |       | 12                       |       | 3,165                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Albuquerque         |       | NM        |       | 12               |       | 20,318             |       | 96                       |       | 150                        |       | ü       |       | 8                        |       | 1,700                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Gallup              |       | NM        |       | 15               |       | 17,916             |       | 121                      |       | 76                         |       | ü       |       | 8                        |       | 1,100                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Las Cruces          |       | NM        |       | 19               |       | 30,667             |       | 102                      |       | 232                        |       | ü       |       | 9                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Moriarity           |       | NM        |       | 26               |       | 18,718             |       | 55                       |       | 245                        |       | ü       |       | 10                       |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Santa Rosa          |       | NM        |       | 25               |       | 25,694             |       | 57                       |       | 116                        |       | ü       |       | 11                       |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Las Vegas           |       | NV        |       | 12               |       | 20,207             |       | 116                      |       | 144                        |       | ü       |       | 10                       |       | 2,600                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Mill City           |       | NV        |       | 73               |       | 38,613             |       | 88                       |       | 152                        |       | ü       |       | 10                       |       | 2,200                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Sparks              |       | NV        |       | 15               |       | 24,827             |       | 122                      |       | 200                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Binghamton          |       | NY        |       | 10               |       | 5,726              |       | 55                       |       | 111                        |       | ü       |       | 8                        |       | 1,400                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Dansville           |       | NY        |       | 16               |       | 13,580             |       | 86                       |       | 102                        |       | ü       |       | 12                       |       | 1,900                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Fultonville         |       | NY        |       | 15               |       | 39,345             |       | 32                       |       | 112                        |       | ü       |       | 10                       |       | 1,500                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Maybrook            |       | NY        |       | 16               |       | 20,499             |       | 85                       |       | 188                        |       | ü       |       | 12                       |       | 2,000                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Pembroke            |       | NY        |       | 16               |       | 13,807             |       | 108                      |       | 132                        |       | ü       |       | 8                        |       | 1,800                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Ashland             |       | OH        |       | 7                |       | 12,888             |       | 106                      |       | —                     |       | ü       |       | —                   |       | 4,000                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Dayton              |       | OH        |       | 90               |       | 12,281             |       | 62                       |       | 232                        |       | ü       |       | 7                        |       | 2,300                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Hebron              |       | OH        |       | 17               |       | 20,337             |       | 39                       |       | 141                        |       | ü       |       | 10                       |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Jeffersonville      |       | OH        |       | 12               |       | 20,257             |       | 87                       |       | 125                        |       | ü       |       | 8                        |       | 3,120                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Kingsville          |       | OH        |       | 37               |       | 23,206             |       | 51                       |       | 158                        |       | ü       |       | 10                       |       | 3,024                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Lodi                |       | OH        |       | 25               |       | 33,775             |       | 133                      |       | 237                        |       | ü       |       | 10                       |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| London              |       | OH        |       | 27               |       | 19,224             |       | 109                      |       | 185                        |       | ü       |       | 8                        |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| North Canton        |       | OH        |       | 11               |       | 8,466              |       | 77                       |       | 93                         |       |         |       | 8                        |       | 950                    |       | ü                            |       | ü                      |       |     |       |      |       |
| Toledo              |       | OH        |       | 18               |       | 19,156             |       | 108                      |       | 207                        |       | ü       |       | 10                       |       | 2,116                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Youngstown          |       | OH        |       | 16               |       | 30,466             |       | 120                      |       | 161                        |       |         |       | 10                       |       | 2,200                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Oklahoma City  East |       | OK        |       | 19               |       | 26,327             |       | 77                       |       | 175                        |       | ü       |       | 10                       |       | 2,500                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Oklahoma City West  |       | OK        |       | 19               |       | 18,622             |       | 72                       |       | 150                        |       | ü       |       | 8                        |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Sayre               |       | OK        |       | 20               |       | 10,439             |       | 25                       |       | 101                        |       | ü       |       | 9                        |       | 1,900                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Portland            |       | OR        |       | 20               |       | 17,135             |       | 30                       |       | 275                        |       | ü       |       | 8                        |       | 2,849                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Troutdale           |       | OR        |       | 25               |       | 44,282             |       | 73                       |       | 225                        |       | ü       |       | 10                       |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Barkeyville         |       | PA        |       | 61               |       | 9,426              |       | 135                      |       | 112                        |       | ü       |       | 8                        |       | 1,050                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Bloomsburg          |       | PA        |       | 13               |       | 19,105             |       | 104                      |       | 190                        |       | ü       |       | 8                        |       | 1,885                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Brookville          |       | PA        |       | 49               |       | 20,600             |       | 109                      |       | 264                        |       | ü       |       | 8                        |       | 2,350                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Greencastle         |       | PA        |       | 24               |       | 14,149             |       | 114                      |       | 194                        |       | ü       |       | 12                       |       | 3,335                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Harborcreek         |       | PA        |       | 27               |       | 25,227             |       | 138                      |       | 266                        |       | ü       |       | 10                       |       | 2,900                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Harrisburg          |       | PA        |       | 54               |       | 20,195             |       | 110                      |       | 178                        |       |         |       | 9                        |       | 2,200                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Lamar               |       | PA        |       | 68               |       | 11,625             |       | 95                       |       | 168                        |       | ü       |       | 9                        |       | 1,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Milesburg           |       | PA        |       | 11               |       | 8,822              |       | 30                       |       | 122                        |       | ü       |       | 8                        |       | 1,360                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Florence(2)         |       | SC        |       | 10               |       | 30,340             |       | 94                       |       | 77                         |       | ü       |       | 9                        |       | 3,000                  |       |                              |       |                        |       | ü   |       |      |       |
| Manning             |       | SC        |       | 15               |       | 17,946             |       | 80                       |       | 84                         |       | ü       |       | 8                        |       | 2,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Spartanburg         |       | SC        |       | 26               |       | 31,682             |       | 122                      |       | 187                        |       | ü       |       | 8                        |       | 1,740                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Antioch             |       | TN        |       | 22               |       | 20,856             |       | 158                      |       | 154                        |       | ü       |       | 9                        |       | 2,200                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Franklin            |       | TN        |       | 13               |       | 15,922             |       | 91                       |       | 100                        |       | ü       |       | 8                        |       | 1,500                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Knoxville           |       | TN        |       | 24               |       | 22,868             |       | 99                       |       | 128                        |       |         |       | 10                       |       | 2,314                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Nashville           |       | TN        |       | 17               |       | 23,280             |       | 230                      |       | 154                        |       |         |       | 10                       |       | 2,257                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Amarillo West       |       | TX        |       | 25               |       | 33,226             |       | 150                      |       | 243                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Baytown             |       | TX        |       | 17               |       | 11,715             |       | 88                       |       | 184                        |       | ü       |       | 12                       |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Big Spring          |       | TX        |       | 14               |       | 24,772             |       | 59                       |       | 108                        |       | ü       |       | 6                        |       | 3,100                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Dallas South        |       | TX        |       | 20               |       | 18,081             |       | 100                      |       | 146                        |       | ü       |       | 8                        |       | 2,400                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Ganado              |       | TX        |       | 11               |       | 20,030             |       | 87                       |       | 104                        |       | ü       |       | 8                        |       | 4,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| New Braunfels       |       | TX        |       | 20               |       | 19,307             |       | 115                      |       | 298                        |       | ü       |       | 10                       |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Rockwall            |       | TX        |       | 13               |       | 16,714             |       | 90                       |       | 100                        |       | ü       |       | 6                        |       | 2,400                  |       |                              |       | ü                      |       | ü   |       |      |       |
| San Antonio         |       | TX        |       | 31               |       | 32,750             |       | 82                       |       | 258                        |       | ü       |       | 8                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Terrell             |       | TX        |       | 22               |       | 21,683             |       | 125                      |       | 401                        |       | ü       |       | 12                       |       | 4,100                  |       | ü                            |       | ü                      |       | ü   |       |      |       |

 

10

----

 
| **City**       | ** ** | **State** | ** ** | **Total  Acres** | ** ** | **Building  area** | ** ** | **Car  parking  spaces** | ** ** | **Truck  parking  spaces** | ** ** | **Gasoline** | ** ** | **# Diesel  lanes** | ** ** | **Store  sales  area** | ** ** | **Full service  restaurant** | ** ** | **Truck  repair  facility** | ** ** | **QSRs** | ** ** | **Hotel** | ** ** |
|----------------|------------|-----------|------------|------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|------------|--------------|------------|--------------------------|------------|------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------|------------|-----------|------------|
| Meridian       |       | MS        |       | 13               |       | 17,330             |       | 41                       |       | 90                         |       | ü       |       | 8                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Candler        |       | NC        |       | 20               |       | 12,853             |       | 45                       |       | 98                         |       | ü       |       | 8                        |       | 1,536                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Greensboro     |       | NC        |       | 29               |       | 29,508             |       | 122                      |       | 186                        |       | ü       |       | 12                       |       | 2,798                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Grand Island   |       | NE        |       | 19               |       | 19,223             |       | 64                       |       | 82                         |       | ü       |       | 6                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Ogallala       |       | NE        |       | 17               |       | 17,594             |       | 72                       |       | 94                         |       | ü       |       | 8                        |       | 2,516                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Parowan        |       | UT        |       | 7                |       | 9,144              |       | 61                       |       | 48                         |       | ü       |       | 6                        |       | 2,900                  |       |                              |       | ü                      |       | ü   |       |      |       |
| Salt Lake City |       | UT        |       | 20               |       | 18,843             |       | 75                       |       | 191                        |       | ü       |       | 7                        |       | 2,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Ashland        |       | VA        |       | 19               |       | 25,841             |       | 98                       |       | 183                        |       | ü       |       | 8                        |       | 2,328                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Richmond       |       | VA        |       | 25               |       | 20,453             |       | 81                       |       | 154                        |       | ü       |       | 18                       |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Roanoke        |       | VA        |       | 12               |       | 21,033             |       | 103                      |       | 129                        |       | ü       |       | 8                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       | ü    |       |
| Wytheville     |       | VA        |       | 17               |       | 20,654             |       | 108                      |       | 114                        |       | ü       |       | 10                       |       | 3,044                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Seattle East   |       | WA        |       | 16               |       | 20,365             |       | 60                       |       | 150                        |       |         |       | 6                        |       | 2,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Hudson         |       | WI        |       | 15               |       | 15,443             |       | 30                       |       | 100                        |       | ü       |       | 7                        |       | 1,800                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Madison        |       | WI        |       | 11               |       | 16,446             |       | 102                      |       | 118                        |       | ü       |       | 9                        |       | 1,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Hurricane      |       | WV        |       | 21               |       | 16,544             |       | 53                       |       | 76                         |       | ü       |       | 10                       |       | 1,500                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Wheeling       |       | WV        |       | 8                |       | 12,346             |       | 36                       |       | 182                        |       |         |       | 10                       |       | 2,958                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Cheyenne       |       | WY        |       | 23               |       | 18,590             |       | 66                       |       | 150                        |       | ü       |       | 10                       |       | 2,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Fort Bridger   |       | WY        |       | 135              |       | 14,646             |       | 19                       |       | 165                        |       | ü       |       | 10                       |       | 2,800                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Rawlins        |       | WY        |       | 28               |       | 18,594             |       | 80                       |       | 188                        |       | ü       |       | 12                       |       | 4,100                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Woodstock(1)   |       | Ont. Can. |       | 27               |       | 28,000             |       | 103                      |       | 202                        |       | ü       |       | 12                       |       | 3,000                  |       | ü                            |       | ü                      |       |     |       |      |       |

 

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ü Amenity present at travel center.

(1)           Property owned by us.

(2)           Property owned by a third party other than Hospitality Trust and leasedto or managed by us.

(3)           In 2006, this travel center was razed and a truck maintenance and repairfacility was built on this site. We expect the redevelopment of this site willbe completed in 2007.

Hospitality Trust owns the land and the buildings for137, and the land but not the buildings (which we own) for the remaining nine,of the 146 travel centers we lease from Hospitality Trust.

**Our Lease with Hospitality Trust**

Our lease with Hospitality Trust became effective uponcompletion of the spin off on January 31, 2007. One of our subsidiaries is thetenant under the lease, and we, and our subsidiaries TravelCenters of AmericaHolding Company LLC and TA Operating LLC guarantee the tenant’s obligationsunder the lease.  Because our lease withHospitality Trust was prepared by Hospitality Trust and was not negotiated atarm’s length, the lease may provide more benefits to Hospitality Trust than tous. The following is a summary of the material terms of this lease:

*Operating Costs.*   The lease is a so called “triple net”lease which requires us to pay all costs incurred in the operation of theleased travel centers, including personnel, utilities, acquiring inventories,service to customers, insurance, real estate and personal property taxes andground lease payments, if any.

*Minimum Rent.*   The lease requires us to pay minimumrent to Hospitality Trust as follows:
| Lease Year                            | ** ** | **Annual Rent (000s)** | ** ** | **Per Month (000s)** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| February 1, 2007  through January 31, 2008 |       | $                                | 153,500    |                           | $          | 12,792 |   |
| February 1, 2008  through January 31, 2009 |       | 157,000                          |       | 13,083                         |       |
| February 1, 2009  through January 31, 2010 |       | 161,000                          |       | 13,417                         |       |
| February 1, 2010  through January 31, 2011 |       | 165,000                          |       | 13,750                         |       |
| February 1, 2011  through January 31, 2012 |       | 170,000                          |       | 14,167                         |       |
| February 1, 2013 and  thereafter           |       | 175,000                          |       | 14,583                         |       |
|                                            |            |                                  |            |                                |            |  |  |

 

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In addition, minimum rents may increase if HospitalityTrust funds or reimburses the cost of renovations, improvements and equipmentrelated to the leased travel centers as described below.

*Improvements.*   Hospitality Trust has agreed to provideup to $25 million of funding annually for the first five years of thelease for certain specified improvements to the leased properties. This fundingis cumulative, meaning if some portion of the $25 million is not spent inone year it may be drawn by us from Hospitality Trust in subsequent years;provided, however, the entire $125 million of funding must be drawn beforeDecember 31, 2015. All improvements purchased with this funding will beowned by Hospitality Trust. There will be no adjustment in our minimum rent asthese amounts are funded by Hospitality Trust.

*Maintenance and Alterations.*   Except for Hospitality Trust’scommitment to fund up to $125 million as described above, we mustmaintain, at our expense, the leased travel centers in good order and repair,including structural and non-structural components. The lease requires us tosubmit an annual budget for capital expenditures at the leased travel centersto Hospitality Trust for approval. We may request that Hospitality Trust fundapproved amounts for renovations, improvements and equipment at the leasedtravel centers, in addition to the $125 million described above, in returnfor minimum annual rent increases according to a formula: generally, theminimum rent per year will be increased by an amount equal to the amount fundedby Hospitality Trust times the greater of (i) 8.5% or (ii) abenchmark U.S. Treasury interest rate plus 3.5%. At the end of the leasewe must surrender the leased travel centers in substantially the sameconditions as existed at the commencement of the lease subject to any permittedalterations and ordinary wear and tear.

*Percentage Rent.*   Starting in 2012, the lease willrequire us to pay Hospitality Trust additional rent with respect to each leaseyear generally in an amount equal to three percent (3%) of increases innon-fuel gross revenues and three tenths of one percent (0.3%) of increases ingross fuel revenues at each leased travel center over the respective grossrevenue amounts for the year 2011. Percentage rent attributable to fuel salesis subject to a maximum each year calculated by reference to changes in theconsumer price index.

*Term.*   The lease expires on December 31,2022.

*Assignment and Subletting.*   Hospitality Trust’s consent is requiredfor any direct or indirect assignment or sublease of any of the leased travelcenters. We remain liable under the lease for subleased and franchised travelcenters.

*Environmental Matters.*   We indemnify Hospitality Trust fromliabilities which may arise from any violation of any environmental law orregulation which occurs during the term of the lease.

*Indemnification and Insurance.*   With limited exceptions, we indemnifyHospitality Trust from liabilities which arise during the term of the leasefrom ownership or operation of the leased travel centers. We generally mustmaintain commercially reasonable insurance. Our insurance coverage includes:

·                  “all risk” property insurance, in anamount equal to the full replacement cost of at risk improvements at our leasedtravel centers;

·     businessinterruption insurance;

·               comprehensive general liabilityinsurance, including bodily injury and property damage, in amounts as aregenerally maintained by companies operating travel centers;

·     floodinsurance for any travel center located in whole or in part in a flood plain;

·     worker’scompensation insurance if required by law; and

12

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·               such additional insurance as may begenerally maintained by companies operating travel centers, including certainenvironmental insurance.

The lease requires that Hospitality Trust be named asan additional insured under our policies.

*Damage, Destruction or Condemnation.*   If any leased travel center is damagedby fire or other casualty or taken by eminent domain, we are generallyobligated to rebuild. If the leased travel center cannot be restored,Hospitality Trust will generally receive all insurance or taking proceeds, weare liable to Hospitality Trust for any deductible or deficiency between thereplacement cost and the amount of proceeds, and the annual minimum rent willbe reduced by, at Hospitality Trust’s option, either 8.5% of the net proceedspaid to Hospitality Trust or the fair market rental of the damaged, destroyedor condemned property, or portion thereof, as of the commencement date of thelease.

*Events of Default.*   Events of default under the leaseinclude the following:

·     ourfailure to pay rent or any other sum when due;

·     ourfailure to maintain the insurance required under the lease;

·     theoccurrence of certain events with respect to our insolvency;

·     theinstitution of a proceeding for our dissolution;

·     ourfailure to continuously operate any leased travel center;

·     anyperson or group of affiliated persons acquiring ownership of more than 9.8% ofus without Hospitality Trust’s consent;

·     anychange in our control or sale of a material portion of our assets withoutHospitality Trust’s consent;

·               our default under any indebtedness of$10 million or more which gives the holder the right to accelerate thematurity of the indebtedness; and

·               our failure to perform certain othercovenants or agreements of the lease and the continuance thereof for aspecified period of time after written notice.

*Remedies.*   Following the occurrence of any event ofdefault, the lease provides that, among other things, Hospitality Trust may, tothe extent legally permitted:

·     acceleratethe rent;

·     terminatethe lease; and/or

·               make any payment or perform any actrequired to be performed by us under the lease and receive from us, on demand,an amount equal to the amount so funded by Hospitality Trust plus interestthereon at a rate equal to 104% of the greater of (i) 8.5% or (ii) abenchmark U.S. Treasury interest rate plus 3.5%, but in no event greater thanthe maximum rate permitted by law.

13

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We are also obligated to reimburse Hospitality Trustfor all costs and expenses incurred in connection with any exercise of theforegoing remedies.

*Lease Subordination.*   Our lease may be subordinated to anymortgages of the leased travel centers by Hospitality Trust, but HospitalityTrust is required to obtain a nondisturbance agreement for our benefit.

*Financing Limitations; Security.*   Without Hospitality Trust’s priorwritten consent, our tenant subsidiary may not incur debt secured by any of itsassets used in the operation of the leased travel centers; provided, however,our tenant subsidiary may incur purchase money debt to acquire assets used inthese operations and we may encumber such assets to obtain a line of credit securedby our tenant subsidiary receivables, inventory or certain other assets used inthese operations.

*Lease Termination.*   When the lease terminates, anyequipment, furniture, fixtures, inventory and supplies at the leased travelcenters that we own may be purchased by Hospitality Trust at their then fairmarket value. Also at lease termination, Hospitality Trust has the right tolicense any of our software used in the operation of the leased travel centersat its then fair market value, to offer employment to employees at the leasedtravel centers and we have agreed to cooperate in the transfer of permits,agreements and the like necessary for the then current operation of the leasedtravel centers.

*Territorial Restrictions.*   Under the terms of the lease, wegenerally cannot own, franchise, operate, lease or manage any travel center orsimilar property within 75 miles in either direction along the primaryinterstate on which the leased travel center is located without the consent ofHospitality Trust, unless we owned, franchised or operated that travel centeron the date the lease commenced or unless that travel center is owned byHospitality Trust.

*Non-Economic Properties.*   If during the lease term the continuedoperation of any leased travel center becomes non-economic as defined in thelease, we may offer such travel center for sale including a sale of HospitalityTrust’s interest in the property, free and clear of our leasehold interests.The net sale proceeds received will be paid to Hospitality Trust and the annualminimum rent payable shall be reduced by, at Hospitality Trust’s option, eitherthe amount of such proceeds times 8.5% or the fair market rental for suchproperty as of the commencement date of the lease. No more than a total of 15leased properties may be offered for sale as non-economic properties during thelease term. No sale of a leased property may be completed without HospitalityTrust’s consent; provided, however, if Hospitality Trust does not consent, thatproperty will no longer be part of the lease and the minimum rent will bereduced as if the sale had been completed.

**Relationships with Franchisees**

We have lease and franchise agreements with lesseesand owners of travel centers. We collect rent, franchise, royalty and otherfees under these agreements. As of March 15, 2007, there were 23 travel centersin our network that are operated by our franchisees. Ten of these travelcenters are leased by us from Hospitality Trust and subleased by us to afranchisee. Thirteen of these travel centers are owned, or leased from others,by our franchisees. Seventeen of these travel centers operate under our currentform of franchise agreement and the remaining six operate under “legacy”franchise agreements described below. As of March 15, 2007, we have agreed tofranchise the “TravelCenters of America” and “TA” names to the owner of atravel center in Greeneville, TN.  Weexpect the franchise agreement to begin during the second quarter of 2007 whenthe owner completes certain facility improvements required to meet our brandstandards. Under the terms of our lease agreement with Hospitality Trust,generally we have the right to use trademarks owned by Hospitality Trust in ourfranchise operation during the term of our lease with Hospitality Trust or fora longer period coterminous with the duration of any third party rightspursuant to our franchise agreements. Our franchised locations as of March 15,2007, are generally described in the following chart:

14

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| **City**               | ** ** | **State** | ** ** | **Total  Acres** | ** ** | **Building  area** | ** ** | **Car  parking  spaces** | ** ** | **Truck  parking  spaces** | ** ** | **Gasoline** | ** ** | **# Diesel  lanes** | ** ** | **Store  sales  area** | ** ** | **Full service  restaurant** | ** ** | **Truck  repair  facility** | ** ** | **QSRs** | ** ** | **Hotel** | ** ** |
|------------------------|------------|-----------|------------|------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|------------|--------------|------------|--------------------------|------------|------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------|------------|-----------|------------|
| Montgomery (1)         |       | AL        |       | 10               |       | 15,739             |       | 55                       |       | 125                        |       | ü       |       | 8                        |       | 1,442                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Baldwin (1)            |       | FL        |       | 18               |       | 15,042             |       | 44                       |       | 137                        |       | ü       |       | 7                        |       | 2,300                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Jacksonville South (1) |       | FL        |       | 19               |       | 22,855             |       | 90                       |       | 90                         |       | ü       |       | 7                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Atlanta South (1)      |       | GA        |       | 29               |       | 20,520             |       | 100                      |       | 200                        |       | ü       |       | 8                        |       | 3,600                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Lake Park (1)          |       | GA        |       | 9                |       | 14,900             |       | 60                       |       | 75                         |       | ü       |       | 8                        |       | 1,008                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Walcott (2)            |       | IA        |       | 70               |       | 107,375            |       | 250                      |       | 300                        |       | ü       |       | 15                       |       | 39,790                 |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Clayton (1)            |       | IN        |       | 16               |       | 14,130             |       | 108                      |       | 100                        |       | ü       |       | 7                        |       | 3,232                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Beto Junction (2)      |       | KS        |       | 35               |       | 23,000             |       | 112                      |       | 275                        |       | ü       |       | 7                        |       | 3,400                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Oakley (2)             |       | KS        |       | 13               |       | 13,200             |       | 40                       |       | 100                        |       | ü       |       | 5                        |       | 3,116                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Albert Lea (2)         |       | MN        |       | 31               |       | 49,000             |       | 270                      |       | 305                        |       | ü       |       | 10                       |       | 6,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Mt.Vernon (2)          |       | MO        |       | 15               |       | 22,000             |       | 90                       |       | 150                        |       | ü       |       | 12                       |       | 5,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Strafford (2)          |       | MO        |       | 18               |       | 20,000             |       | 90                       |       | 130                        |       | ü       |       | 8                        |       | 4,000                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Kenly (2)              |       | NC        |       | 34               |       | 36,000             |       | 120                      |       | 200                        |       | ü       |       | 12                       |       | 3,500                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Napoleon (2)           |       | OH        |       | 10               |       | 9,000              |       | 100                      |       | 120                        |       | ü       |       | 8                        |       | 3,500                  |       | ü                            |       |                        |       | ü   |       |      |       |
| Wapakoneta (2)         |       | OH        |       | 19               |       | 30,000             |       | 50                       |       | 140                        |       | ü       |       | 8                        |       | 5,000                  |       | ü                            |       | ü                      |       |     |       |      |       |
| Eugene (2)             |       | OR        |       | 20               |       | 25,000             |       | 50                       |       | 140                        |       | ü       |       | 8                        |       | 6,500                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Breezewood (2)         |       | PA        |       | 30               |       | 27,000             |       | 125                      |       | 200                        |       | ü       |       | 9                        |       | 12,000                 |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Jackson (1)            |       | TN        |       | 10               |       | 13,527             |       | 90                       |       | 100                        |       | ü       |       | 9                        |       | 2,784                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Knoxville West (1)     |       | TN        |       | 25               |       | 22,238             |       | 146                      |       | 176                        |       | ü       |       | 8                        |       | 1,728                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Denton (1)             |       | TX        |       | 15               |       | 19,247             |       | 62                       |       | 110                        |       | ü       |       | 8                        |       | 2,604                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Edinburg (2)           |       | TX        |       | 18               |       | 14,500             |       | 32                       |       | 120                        |       | ü       |       | 6                        |       | 3,000                  |       | ü                            |       | ü                      |       | ü   |       | ü    |       |
| Sweetwater (1)         |       | TX        |       | 18               |       | 12,600             |       | 43                       |       | 160                        |       | ü       |       | 8                        |       | 2,750                  |       | ü                            |       | ü                      |       | ü   |       |      |       |
| Janesville (2)         |       | WI        |       | 5                |       | 12,000             |       | 45                       |       | 85                         |       | ü       |       | 7                        |       | 8,500                  |       |                              |       |                        |       |     |       |      |       |

 

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ü Amenity present at travel center.

(1)                                  Owned by Hospitality Trust and operated byfranchisee subject to network lease and franchise agreements.

(2)                                  Owned and operated by franchisee subject tofranchise agreement.

*Network Franchise Agreements*

Material provisions of our network franchiseagreements include the following:

*Initial Franchise Fee.*   The initial franchise fee for a newfranchise is $100,000.

*Term of Agreement.*   The initial term of the networkfranchise agreement is ten years. The network franchise agreement provides fortwo five year renewals on the terms then being offered to prospectivefranchisees at the time of the franchise renewal. The remaining initial termsof the current network franchise agreements end in 2012 through 2015. Theaverage remaining term of these agreements as of March 15, 2007, including allrenewal periods, was approximately 16 years.

*Protected Territory.*   Generally we have agreed not tooperate, or allow another person to operate, a travel center or travel centerbusiness that uses the “TravelCenters of America” or “TA” brand within 75 milesin either direction along the primary interstate on which the franchised travelcenter is located.

*Restrictive Covenants.*   Generally our franchisees may notoperate any travel center or truck stop related business under a franchiseagreement, licensing agreement or marketing plan or system of another person orentity. If the franchisee owns the franchised premises, generally for a twoyear period after termination of our franchise agreement the franchisee may notoperate the site with a competitive brand.

*Fuel Purchases, Sales and Royalties.*   Our franchisees that operate travelcenters that they lease from us must purchase all of their diesel fuel from us;our franchisees that operate travel centers that they own are not required topurchase their diesel fuel from us. Our franchisees may purchase gasoline onlyfrom suppliers that we approve and generally must pay a royalty fee to us of$0.03 per gallon of gasoline sold.

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*Royalty Payments on Non-FuelRevenues.*  Franchisees are required to pay us a royalty fee generally equal to3.75% of all non-fuel revenues. If a franchisee operates one or more QSRs onthe franchised premises, the franchisee must pay us 3% of all revenues inconnection with those sales net of royalties paid to QSR franchisors.

*Advertising, Promotion and ImageEnhancement.*   Ourfranchisees are required to contribute 0.6% of their non-fuel revenues and netrevenues from QSRs to partially fund system wide advertising, marketing andpromotional expenses we incur.

*Non-fuel Product Offerings.*   Franchisees are required to operatetheir travel centers in conformity with guidelines that we establish and offerany products and services that we deem to be a standard, or “core”, product orservice in our network.

*Termination/Nonrenewal.*   Generally, we may terminate or refuseto renew a network franchise agreement for default by the franchisee. We mayalso refuse to renew if we determine that renewal would not be in our economicinterest or if the franchisee will not agree to the terms in our then currentform of franchise agreement.

*Legacy Franchise Agreements*

Six of our 23 franchised travel centers are operatedunder forms of franchise agreements that our predecessor used prior to 2002,when our predeessor adopted the franchise contract form described above as ournetwork franchise agreement. The terms of these legacy franchise agreements aregenerally the same as our current network franchise agreements, except: thelegacy franchise agreements generally require franchisees to pay us a royaltyfee of 4% of all revenues earned directly or indirectly by the franchisee fromany business conducted at or from the franchised premises, excluding fuel salesand sales at QSRs; and these legacy franchise agreements do not requirefranchisees to purchase their diesel fuel from us, but generally require afranchisee to pay us an additional royalty fee of $0.004 per gallon on sales ofqualified diesel fuel at the franchised travel center. The average remainingterm of these legacy agreements as of March 15, 2007, was approximately threeyears.

*Network Lease Agreements*

In addition to franchise fees, we also collectsublease rent from franchisees for the ten travel centers operated byfranchisees that sublease travel centers from us. Each operator of a travelcenter that enters into a network lease agreement also must enter into anetwork franchise agreement. The material provisions of a network leaseagreement include the following:

*Operating Costs.*   The franchisee is responsible for thepayment of all costs and expenses in connection with the operation of theleased travel centers, typically excluding certain environmental costs, certainmaintenance costs and real property taxes.

*Term of Agreement.*   The leases have an initial term of tenyears and allow for two renewals of five years each. The remaining initialterms of the current network lease agreements end in 2012. The averageremaining term of these agreements as of March 15, 2007, including all renewalperiods, was approximately 16 years.

*Rent.*   Under the network lease, a franchiseemust pay annual fixed rent equal to the sum of:

·     baserent;

·               improvement rent, if any, which isdefined as an amount equal to 14% per annum of the cost of all capitalimprovements we fund that we and the franchisee mutually agree will enhance thevalue of the leased premises and which cost in excess of $2,500; and

·     anannual inflator equal to the percentage increase in the consumer price index.

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*Use of the Leased Travel Center.*   The leased travel center must beoperated as a travel center in compliance with all laws, including allenvironmental laws. The franchisee must submit to quality inspections that werequest and appoint, subject to our approval, an employee as manager who isresponsible for the day to day operations at the leased travel center.

*Termination/Nonrenewal.*   The network lease agreements containterms and provisions regarding termination and nonrenewal, which aresubstantially the same as the terms and provisions of the network franchiseagreement. The network lease agreements are cross defaulted with the relatednetwork franchise agreements. In certain cases, we may reimburse the franchiseefor a portion of the cost of certain capital improvements upon termination ofthe network lease.

*Franchise Regulation*

Some states require state registration and delivery ofspecified disclosure documentation to potential franchisees and impose specialregulations on petroleum franchises. Some state laws also impose restrictionson our ability to terminate or not to renew franchises and impose other limitationson the terms of our franchise relationships or the conduct of the business ofour franchisor subsidiary. A number of states include, within the scope oftheir petroleum franchising statutes, prohibitions against price discriminationand other allegedly anticompetitive conduct. These provisions supplementapplicable federal and state antitrust laws. Federal Trade Commissionregulations require that we make extensive disclosure to prospectivefranchisees. We believe that we are in compliance with all franchise lawsapplicable to our business.

**Competition**

The travel center and truck stop industry isfragmented and highly competitive. We believe that there are in excess of 3,000travel center and truck stops located on or near highways nationwide.

Fuel and non-fuel products and services can beobtained by long haul truck drivers from a variety of sources, includingregional full service travel center and pumper only truck stop chains,independently owned and operated truck stops and some large service stations.In addition, some trucking companies operate their own terminals to providefuel and services to their own trucking fleets.

There are generally two types of fueling stationsdesigned to serve the trucking industry:

·               full service travel centers, such asthose in our network, which offer a broad range of products and services tolong haul trucking fleets and their drivers, independent truck drivers andmotorists, including: diesel fuel and gasoline; full service restaurants; QSRs;truck repair and maintenance; travel and convenience stores; parking areas; andvarious driver amenities; and

·               so called “pumper only” truck stops,which provide diesel fuel, typically at discounted prices, with limitedadditional services.  A pumper only chainmay include a majority of travel centers which typically contain no, or onlyone or two QSRs, limited store facilities and no truck repair and maintenancefacilities.

We experience substantial competition from pumper onlytruck stop chains based principally on diesel fuel prices.

We also experience substantial competition fromregional and super regional full service travel center networks, which is basedprincipally on diesel fuel prices and non-fuel product and service offerings.

Our truck repair and maintenance facilities competewith regional full service travel center and truck stop chains, full serviceindependently owned and operated truck stops, fleet maintenance terminals,independent garages, truck dealerships, truck quick lube facilities and otherparts and service centers.

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We also compete with other full service restaurants,QSRs, mass merchandisers, electronics stores, drugstores and travel andconvenience stores.

Many truck fleets own their own fuel, repair andmaintenance facilities. Although we believe the long term trend has been towarda reduction in these facilities in favor of obtaining fuel, repair andmaintenance services from third parties like us, during the last few years ofhistorically volatile fuel prices, this long term trend appears to have slowed.

An additional source of competition in the futurecould result from commercialization of state owned interstate highway restareas. Some state governments have historically requested that the federalgovernment allow these rest areas to offer fuel and non-fuel products andservices similar to that of a travel center. If commercialized, these restareas may materially increase the number of locations competing with us.

We believe we will be able to compete successfully forthe following reasons:

·               By offering consistent, high qualityproducts and services in our nationwide locations we are able to attract fleetand independent professional truck drivers as well as motorists.

·               Our management team has substantialexperience in operating our business. In addition, our management and sharedservices agreement with Reit Management & Research LLC, or Reit Management,may provide us with additional experience and knowledge in real estateacquisitions, maintenance and development, as well as in public companyoperations and finance and other areas.

·               Our continuing relationship withHospitality Trust may provide us opportunities to expand our business byacquiring new leaseholds for travel centers in cooperation with HospitalityTrust and by providing us with a source of financing for improvement to ourexisting centers and for development of new travel centers.

Although we believe our management team is highlytalented, not all of the members of our team have extensive experience workingtogether. We expect we may expand our business with Hospitality Trust; however,Hospitality Trust is not obligated to provide us with opportunities to leaseadditional properties, and we may not be able to find other sources of capitalsufficient to maintain and grow our travel center business. Also, some of ourcompetitors have substantially more resources than we do; and some of ourcompetitors have vertically integrated fuel businesses which may provide themcompetitive advantages. For all of these reasons and others, we can provide noassurance that we will be able to compete successfully.

**Environmental Matters**

Our operations and properties are extensivelyregulated by environmental laws under which we may be required to investigateand clean up hazardous substances, including petroleum products, released at aproperty, and may be held liable to governmental entities or to third partiesfor property damage and personal injuries and for investigation and clean upcosts incurred in connection with any contamination. These laws:

·               govern operations that may have adverseenvironmental effects, such as discharges to air, soil and water, as well asthe management of hazardous substances; and

·               impose liability for the costs ofcleaning up properties affected by, and for damages resulting from, disposal orother releases of hazardous substances.

We use underground storage tanks and above groundstorage tanks to store petroleum products and waste at our travel centers. Wemust comply with environmental laws regarding tank construction, integritytesting, leak detection and monitoring, overfill and spill control, releasereporting and financial assurance for corrective action in case of a release.At some locations, we must also comply with environmental laws relating tovapor recovery or discharges to water.

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From time to time our predecessor received notices ofalleged violations of environmental laws or otherwise became aware of the needto undertake corrective actions to comply with environmental laws at its travelcenters and regularly conducted investigatory and remedial actions with respectto releases of hazardous substances at the travel centers we operate. In somecases we may receive contributions to partially offset our environmental costsfrom insurers, from state funds established for environmental clean upassociated with the sale of petroleum products or from indemnitors who agreedto fund certain environmental related costs at travel centers we or ourpredecessor purchased from such indemnitors.

In 2006 our predecessor commissioned a third partyreview of currently known environmental liabilities to confirm its estimates ofthe likely amounts of remediation costs at currently active sites and what ourpredecessor believed will be its share of those costs. As of December 31, 2006,our predecessor had a reserve of $10.8 million for unindemnifiedenvironmental matters for which we will be responsible, a receivable forestimated insurance recoveries of these estimated future expenditures of$4.4 million and $4.4 million of cash in an escrow account to fundcertain of these estimated expenditures, leaving an estimated net amount of$2.0 million to be funded by us in the future. While we cannot preciselyestimate the ultimate costs we will incur in connection with currently known orfuture potential environmental related violations, corrective actions,investigation and remediation; however, based on our current knowledge we donot expect that the costs to be incurred at our travel centers, individually orin the aggregate, will be material to our financial condition, results ofoperations or cash flow.

Despite our present expectation, we cannot be certainthat we know of all existing contamination present in our travel centernetwork, or that material liability will not be imposed on us in the future. Ifadditional environmental problems arise or are discovered, or if additionalenvironmental requirements are imposed by government agencies, increasedenvironmental compliance or remediation expenditures may be required, whichcould have a material adverse effect on us.

We expect to continue our predecessor’s program andretain the personnel dedicated to monitoring our exposure to environmentalliabilities. Also, we have insurance of up to $35 million forunanticipated costs regarding certain known environmental liabilities and of upto $40 million regarding certain unknown or future environmentalliabilities subject to certain limitations and deductibles. However, as notedabove, we can provide no assurance that:

·               weor a prior owner, operator or occupant of our travel centers did not create amaterial environmental condition not known to us at this time;

·               futureuses or conditions (including, without limitation, changes in applicableenvironmental laws and regulations) will not result in the imposition ofadditional environmental liability upon us; or

·               we will be able tomaintain similar environmental insurance coverage in the future underacceptable terms.

Under our lease, we have agreed to indemnifyHospitality Trust for any environmental liabilities related to travel centerswhich we lease and which arise during the term of the lease.

***IntellectualProperty***

We own no patents. We have the right to use the name “TravelCentersof America” and other trademarks used by our predecessor which are owned byHospitality Trust, generally during the term of our lease with HospitalityTrust. We also license certain trademarks used in the operation of our QSRs,and licensed to us generally for periods of five to 20 years. We believe thatthese trademarks are important to our business, but, without exception, couldbe replaced with alternative marks without significant disruption in ourbusiness.

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**Employees**

As of March 15,2007, we employed approximately 12,000 people on a full or part timebasis.  Of this total, approximately11,550 were employees at our company operated sites, 400 performed managerial,operational or support services at our headquarters or elsewhere and 50employees staffed our distribution center. Except for an aggregate of 22 employees at two sites, all of ouremployees are non-union.  We believe thatour relationship with our employees is satisfactory.

**Item 1A.**  ***Risk Factors***

Our business faces manyrisks. The risks described below may not be the only risks we face. Additionalrisks that we not yet know of, or that we currently think are immaterial, mayalso impair our business operations or financial results.  If any of the events or circumstancesdescribed in the following risks occurs, our business, financial condition orresults of operations could suffer and the trading price of our securitiescould decline. Investors and prospective investors should carefully considerthe following risks and the information contained under the heading “WarningConcerning Forward Looking Statements” before deciding whether to invest in oursecurities.

**Risks in our business**

***Our operatingmargins are narrow.***

Our predecessor’s total operating revenues for theyear ended December 31, 2006, were $4.8 billion; and our predecessor’scost of goods sold (excluding depreciation) and operating expenses for the sameperiod totaled $4.5 billion. Fuel sales in particular generate low grossmargins. Our predecessor’s fuel sales for the year ended December 31,2006, were $3.9 billion and our predecessor generated a gross profit onfuel sales of $144 million. A small percentage decline in our futurerevenues or increase in our future expenses, especially revenues and expensesrelated to fuel, may have a material adverse effect upon our income or maycause us to experience losses.

***An interruption inour fuel supplies would materially adversely affect our business.***

To mitigate the risks arising from fuel pricevolatility, we generally maintain limited inventories of fuel. Accordingly, aninterruption in our fuel supplies would materially adversely affect ourbusiness. Interruptions in fuel supplies may be caused by local conditions,such as a malfunction in a particular pipeline or terminal, or by national orinternational conditions, such as government rationing, acts of terrorism, warand the like. Any limitation in available fuel supplies which caused a declinein truck freight shipments or which caused a limit on the fuel we can offer forsale may have a material adverse effect on our sales of fuel and non-fuel productsand services or may cause us to experience losses.

***Our storage anddispensing of petroleum products create the potential for environmentaldamages, and compliance with environmental laws may be costly.***

Our business is subject to laws relating to the protectionof the environment. The travel centers we operate include fueling areas, truckrepair and maintenance facilities and tanks for the storage of petroleumproducts and other hazardous substances, all of which create the potential forenvironmental damage. As a result, we regularly incur environmental clean upcosts. Our predecessor’s balance sheet as of December 31, 2006, includedan accrued liability of $10.8 million for environmental remediation costs.Because of the uncertainties associated with environmental expenditures, it ispossible that future expenditures could be substantially higher than thisamount. Environmental laws expose us to the possibility that we may becomeliable to reimburse the government or third parties for damages and costs theyincur in connection with environmental hazards. We cannot predict whatenvironmental legislation or regulations may be enacted or how existing laws orregulations will be administered or interpreted with respect to our products oractivities in the future; more stringent laws, more vigorous enforcementpolicies or stricter interpretation of existing laws in the future could causeus to experience losses.

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In addition, under the lease between us andHospitality Trust, we have agreed to indemnify Hospitality Trust from allenvironmental liabilities it may incur arising at any of our travel centersduring the term of the lease.

***We have limitedcontrol of our franchisees.***

Ten travel centers which we lease from HospitalityTrust are subleased to franchisees. An additional 13 travel centers are ownedand operated by franchisees. The rent and royalties we receive from thesefranchisees represent a significant part of our net income. For the year endedDecember 31, 2006, the rent and royalty revenues generated from thesefranchisee relationships was $10.0 million. Various laws and our existingfranchise contracts limit the control we may exercise over our franchisees’business activities. A failure by our franchisees to pay rents and royalties tous may have a material adverse effect upon our financial results or may causeus to experience losses.

**Risks arising from our formation andcertain relationships**

***We have beenrecently reorganized.***

We are a recently reorganized business. Our board andsenior management include persons associated with Hospitality Trust and itsaffiliates and with Reit Management as well as former executives of ourpredecessor. This management team has no prior experience working together andthey may not be able to do so successfully. Although we have implemented aretention bonus plan for our executives who are former employees of ourpredecessor, we can provide no assurance that we will in fact retain any or allof these persons.

***The restructuringof our business prior to the spin off will result in costs and cash outlayswhich are significantly higher than those of our predecessor and may result ina prolonged period of substantial losses.***

On a pro forma basis for the year endedDecember 31, 2006, we incurred expenses of $176.8 million under theterms of our lease agreement and our management and shared services agreement.This amount is significantly higher than the depreciation, which is a non-cashexpense, and interest expenses that were incurred by our predecessor that wewill avoid after the spin off transaction. In addition, our lease agreementwith Hospitality Trust requires us to make capital expenditures to maintain thetravel centers we lease and the expenditures we make for improvements that arein excess of the $125 million that we may draw from Hospitality Trust willeither be paid by us directly without reimbursement or, if they are reimbursedby Hospitality Trust, increase our rent expense. These additional expenses andcash outlays may result in future substantial losses and negative cash flow. Ifwe incur material losses or negative cash flow, and these losses or negativecash flows persist over a substantial period of time, we may suffer materialnegative impacts on our business, including but not limited to our ability to maintainour travel centers and make payments under our lease agreement with HospitalityProperties, and the market price of our common shares may declinesubstantially.

***Our creation was,and our continuing business will be, subject to conflicts of interest withHospitality Trust and Reit Management.***

Our creation was, and our continuing business will be,subject to conflicts of interest, as follows:

·     Two ofour directors were trustees of Hospitality Trust at the time we were created.

·               We have five directors, one of whom,Barry M. Portnoy, also is a trustee of Hospitality Trust and the majority ownerof Reit Management, one of whom, Arthur G. Koumantzelis, is a former trustee ofHospitality Trust, and one of whom, Thomas M. O’Brien, is a former executiveofficer of Hospitality Trust.

·               Mr. O’Brien, who serves as our Presidentand Chief Executive Officer, is also an employee of Reit Management. AnotherReit Management employee, John R. Hoadley, is our Executive VicePresident, Chief Financial Officer and Treasurer. Reit Management is themanager for Hospitality Trust and we purchase services from Reit Managementpursuant to our management and shared services agreement.

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These conflicts may have caused, and in the future maycause, adverse effects on our business, including:

·               Our lease with Hospitality Trust may beon terms less favorable to us than a lease which was the result of arm’s lengthnegotiations.

·               The terms of our management and sharedservices agreement with Reit Management may be less favorable to us than couldbe achieved on an arm’s length basis.

·               Future business dealings between us andHospitality Trust, Reit Management and their affiliates may be on terms lessfavorable to us than could be achieved on an arm’s length basis.

·               We may have to compete with HospitalityTrust, Reit Management and their affiliates for the time and attention ofMessrs. Portnoy, O’Brien and Hoadley.

***Our lease withHospitality Trust requires that we indemnify Hospitality Trust from variousliabilities.***

Our lease with Hospitality Trust requires that we payfor, and indemnify Hospitality Trust from, liabilities associated with theownership or operation of our leased travel centers which may arise during theterm of our lease. Accordingly our business will be subject to all our businessoperating risks and all the risks associated with real estate including:

·               costs associated with uninsured damages,including damages for which insurance may be unavailable or unavailable oncommercially reasonable terms;

·     costsand damages arising from pending and future litigation;

·     coststhat may be required for maintenance and repair of the travel centers; and

·               costs due to compliance with and changesin laws and other regulations, including environmental laws and the Americanswith Disabilities Act.

***Our relationshipswith Hospitality Trust and Reit Management may limit the growth of ourbusiness.***

In connection with the spin off, we entered agreementswhich prohibit us from acquiring or financing real estate in competition withHospitality Trust or other affiliates of Reit Management, unless thoseinvestment opportunities are first offered to Hospitality Trust or those otherentities.  These restrictions may make itdifficult or impossible for us to alter our business strategy to include investmentsin real estate. Also, because our lease with Hospitality Trust limits ourability to incur debt, ends in 2022 and prohibits ownership of more than 9.8%of our shares by any party, we may be unable to independently finance futuregrowth opportunities.

***Ownershiplimitations and anti-takeover provisions may prevent you from receiving atakeover premium.***

Our limited liability company agreement, or LLCagreement, places restrictions on the ability of any person or group to acquirebeneficial ownership of more than 9.8% (in number of shares, vote or value,whichever is most restrictive) of any class or series of our equity securities.The terms of our lease with Hospitality Trust and our management and sharedservices agreement with Reit Management provide that our rights under theseagreements may be cancelled by Hospitality Trust and Reit Management,respectively, upon the acquisition by any person or group of more than 9.8% ofour voting shares, and upon other change in control events, as defined in thoseagreements. If the breach of these ownership limitations causes a leasedefault, shareholders causing the default may

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become liable to us or to other shareholders fordamages. These agreements and other provisions in our limited liability companyagreement may increase the difficulty of acquiring control of us by means of atender offer, open market purchases, a proxy fight or otherwise. Otherprovisions in our governing documents which may deter takeover proposalsinclude the following:

·     staggered terms for membersof our board of directors;

·               the power of our board of directors,without a shareholders’ vote, to authorize and issue additional shares andclasses or series of shares on terms that it determines;

·     a 75% shareholder vote andcause requirements for removal of directors; and

·     advance notice procedureswith respect to nominations of directors and shareholder proposals.

For any of these reasons, shareholders may be unableto cause a change of control of us or to realize a change of control premiumfor their common shares.

***We may be unable tomeet financial reporting and internal control standards for a publicly ownedcompany.***

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting. Internalcontrol over financial reporting is the process designed by, or under thesupervision of, our Chief Executive Officer and Chief Financial Officer, andeffected by our board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles and includes those policies andprocedures that (i) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect our transactions and dispositions ofassets; (ii) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures arebeing made only in accordance with the authorization of our management anddirectors; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of our assetsthat could have a material effect on our financial statements.

We may identifymaterial weaknesses in our internal control over financial reporting in thefuture. Beginning with our Annual Report on Form 10-K for the year endingDecember 31, 2007, pursuant to Section 404 of the Sarbanes Oxley Act of 2002,our management will be required to assess the effectiveness of our internalcontrol over financial reporting, and, beginning for the year ending December31, 2008, we will be required to have our independent registered publicaccounting firm attest to our management’s assessment and the design andoperating

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effectiveness of ourinternal control over financial reporting. If our management or our independentregistered public accounting firm were to either identify a material weaknessor otherwise conclude in their reports that our internal control over financialreporting was not effective, investors could lose confidence in our reportedfinancial information and the value of our shares could be adversely affectedwhich, in turn, could harm our business, have an adverse effect on our futureability to raise capital and cause the price of our traded securities todecline.

**Item 2.**  ***Properties***

Our principalexecutive offices are leased and are located at 24601 Center Ridge Road, Suite200, Westlake, Ohio 44145-5639. Our distribution center is a leasedfacility located at 1450 Gould Boulevard, LaVergne,Tennessee 37086-3535.

As of March 15, 2007, our network consisted of 164travel centers, 146 of which are leased from Hospitality Trust, two of which weown, three of which are owned by a third party other than Hospitality Trust andleased to or managed by us and 13 of which are owned by our franchisees.  We operate 141 of these travel centers andour franchisees operate 23 of these travel centers. We are constructing onetravel center that is expected to be completed in 2007. We have a parcel ofland under agreement for acquisition on which we may decide to build anadditional facility. Also, we own one site that is closed and held for sale. Weregularly evaluate additional properties to add to our network. We can provideno assurance that we will successfully complete the construction, acquisitionor sale, as applicable, of any of these travel centers.

**Item 3.**  ***Legal Proceedings***

On February 27, 2006, Flying J, Inc. andcertain of its affiliates filed a lawsuit against a subsidiary of ourpredecessor and Pilot Travel Centers, LLC and certain of its affiliates in theU.S. District Court for the District of Utah. Flying J and Pilot are competitors of ours.  Flying J also markets a fuel purchasingcredit card to trucking companies.  TheFlying J lawsuit claims, in essence, that our predecessor’s subsidiary, whichis now our subsidiary, and Pilot have refused to accept the Flying J fuel card,and that such refusal was the result of unlawful concerted action.  Flying J is seeking, among other things, aninjunction requiring our predecessor’s subsidiary and Pilot to accept theFlying J fuel card and damages.  Webelieve that there are substantial factual and legal defenses to Flying J’sclaims.  This case is at an early stageand we cannot estimate our ultimate exposure to loss or liability, if any,related to this litigation.

Beginning in mid December 2006, and continuing to thepresent, a series of class action lawsuits have been filed against numerouscompanies in the petroleum industry, including our predecessor or itssubsidiaries, in United States District Courts in at least 23 states.   Major petroleum companies and significantretailers in the industry have been named as defendants in one or more of theselawsuits.  Our predecessor was named inat least seven cases to date, including cases in the following states:  California, Alabama, New Mexico, Nevada andMissouri. As a result of the restructuring of our predecessor, we may belegally responsible for the actions alleged against our predecessor and itssubsidiary.

The plaintiffs in the lawsuits generally allege thatthey are retail purchasers who purchased motor fuel that was greater than 60degrees Fahrenheit at the time of sale.  There are two primary theories upon which the plaintiffs seek recoveryin these cases.  The first theory allegesthat the plaintiffs purchased smaller quantities of motor fuel than the amountfor which defendants charged them because the defendants measured the amount ofmotor fuel they delivered in non-standard gallons which, at highertemperatures, contain less energy.  The “temperature”cases seek, among other relief, an order requiring the defendants to installtemperature correcting equipment on their retail motor fuel dispensing devices,damages, and attorneys’ fees.   Thesecond theory alleges that fuel taxes are calculated in temperature adjusted 60degree gallons and are collected by the government from suppliers andwholesalers, who are reimbursed in the amount of the tax by the defendantretailers before the fuel is sold to consumers. The “tax” cases allege that when the fuel is subsequently sold toconsumers at temperatures above 60 degrees, the retailers sell a greater volumeof fuel than the amount on which they paid tax, and therefore reap a windfallbecause the customers pay more tax than the retailer paid. The “tax” casesseek, among other relief, recovery of excess taxes paid and punitive damages.

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We believe that there are substantial factual andlegal defenses to the theories alleged in these so called “hot fuel”lawsuits.  The cases are at an earlystage, with motions to consolidate all the cases with one court pursuant tomulti district litigation procedures recently filed, and therefore we cannotestimate our ultimate exposure to loss or liability, if any, related to theselawsuits.

On November 3, 2006, Great American InsuranceCompany of New York and Novartis Pharmaceuticals Corporation (“Novartis”) fileda complaint against TA Operating Corporation, TravelCenters ofAmerica, Inc., and third party Prime, Inc. in connection with thealleged theft of a tractor trailer operated by Prime which contained certain ofNovartis’s pharmaceutical products.  Thealleged theft occurred at our Bloomsbury, New Jersey travel center.  Novartis seeks damages up to or exceeding $30million together with interests and costs, attorneys’ fees anddisbursements.  On January 5, 2007,our predecessor, TravelCenters of America, Inc., answered Novartis’complaint and asserted a cross claim for contribution and indemnificationagainst Prime.  As a result of therestructuring of our predecessor, we may be responsible for any acts of ourpredecessor alleged in this allegation. We believe that there are substantialdefenses to these claims and that any liability arising from this matter may becovered by one or more of our existing insurance policies.

We are involved from time to time in various legal andadministrative proceedings and threatened legal and administrative proceedingsincidental to the ordinary course of our business. Except for the litigationdescribed above, we believe that we are not now involved in any litigationwhich, individually or in the aggregate, could have a material adverse affecton our business, financial condition, results of operations or cash flows.

We are involved from time to time in various legal andadministrative proceedings and threatened legal and administrative proceedingsincidental to the ordinary course of our business. Except for the litigationdescribed above, we believe that we are not now involved in any litigationwhich, individually or in the aggregate, could have a material adverse affecton our business, financial condition, results of operations or cash flows. OnDecember 7, 2005, the Internal Revenue Service, or IRS, seizedapproximately $5.3 million from our bank account pursuant to a seizure warrantalleging that these funds were proceeds of alleged illegal gambling operationsconducted by a game vendor of ours in space leased from us at three of ourtravel centers in Maryland. A complaint for forfeiture was filed by theMaryland U.S. Attorney's Office, and we filed a statement of interest in theseized funds and an answer denying liability. Due to our loss of control over these funds, we expensed as an operatingexpense the full amount seized in December 2005.  In December 2006, we reached a settlementagreement with the IRS under which $1.3 million of the seized funds will bereturned to us and we forfeited all interest in the remaining seized fundswithout an admission of liability.  Werecognized a receivable and a reduction of operating expenses of $1.3 millionin December 2006 and received the funds in March 2007.  As part of our agreement with the gamevendor, the vendor indemnified us against losses such as those we haveincurred, but it is uncertain whether we will be able to recover all or aportion of our losses from the game vendor and a receivable for anyindemnification proceeds has not been recognized.

**Item 4.**  ***Submission of Matters to aVote of Security Holders***

On October 26,2006, acting by a unanimous consent in lieu of a special joint meeting of ourdirectors and sole shareholder, our shareholder authorized us to take actionsin connection with the preparation and filing of our Registration Statement onForm S-1 and other matters related to our spin off from Hospitality Trust, theappointment of our transfer agent and registrar, the approval of ourapplication for listing on the American Stock Exchange, or AMEX, and othervarious administrative matters relating to the foregoing.

**PART II**

**Item 5.**  ***Market for Our CommonEquity and Related Stockholder Matters***

*Marketinformation.*  Ouroutstanding common shares were distributed by Hospitality Trust by adeclaration and payment of a distribution to its common shareholders.  Our common shares were first traded on AMEX(symbol: TA) on January 29, 2007, on a “when issued” basis and have traded “regularway” on the AMEX since February 1, 2007.

*Holders.*  As of March 15, 2007, there were 910 shareholdersof record, and we estimate that as of such date there were in excess of 60,000beneficial owners of our common shares.

*Dividends.*  We have never paid or declared any cashdividends on our common shares.  Atpresent, we intend to retain our future earnings, if any, to fund thedevelopment and growth of our business. Our future decisions concerning the payment of dividends on the commonshares will depend upon our results of operations, financial condition andcapital expenditure plans, as well as other factors as the board of directors,in its discretion, may consider relevant.

*Recentsales of unregistered securities.*  The only securities sold by us to date werethe common shares we sold for nominal consideration to Hospitality Trust priorto the distribution of all of our shares in the spin off. No underwriters wereused in the foregoing transaction. The sale to Hospitality Trust was made inreliance upon the exemption from registration provided by Section 4(2) ofthe Securities Act for transactions by an issuer not involving a publicoffering. The distribution of our shares in the spin off was completed pursuantto an effective registration statement under the federal securities laws.

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**Item6.  *Selected Financial Data***

Since our formation on October 10, 2006, anduntil the completion of the spin off, we had no operations, revenues, expenses,liabilities or assets except the nominal initial capitalization provided byHospitality Trust.

TravelCenters of America, Inc. is considered tobe our predecessor under applicable rules and regulations of the SEC. TheHospitality Trust acquisition, related restructuring and the spin off causedour assets, liabilities, financial position, results of operations and cashflows to be materially different than those of our predecessor. The mostsignificant of these differences include the facts that TravelCenters ofAmerica, Inc.:

·     hadsubstantial indebtedness;

·     owned asubstantial amount of real property; and

·     operatedas a private company;

whereas we:

·     have nofunded debt;

·     leasemost of our travel centers from Hospitality Trust; and

·     operateas a publicly traded company subject to SEC regulation.

Among other things, these differences will cause us toincur substantial expenses which were not incurred by our predecessor, forexample, rent payments to Hospitality Trust and costs associated with operatingas a public company, while allowing us to avoid the interest and depreciationexpenses our predecessor historically incurred. For all of these reasons, thehistorical financial information of our predecessor is not indicative of ourfuture financial position, results of operations or cash flows.

The followingtable presents selected historical financial information of our predecessor foreach of the last five fiscal years. The information set forth below withrespect to fiscal years 2004, 2005 and 2006 was derived from, and should beread in conjunction with, the audited consolidated financial statements of ourpredecessor included elsewhere in this Annual Report on Form 10-K. Theinformation set forth below with respect to the fiscal years 2002 and 2003 wasderived from audited consolidated financial statements of our predecessor thatare not included in this Annual Report on Form 10-K.  The following information should also be readin conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Historical Results of Operations—OurPredecessor” and our pro forma financial statements and the notes theretoincluded elsewhere in this Annual Report on Form 10-K.

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| ** **                                                  | ** ** | **Year Ended December 31,**                                                        | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2002**                                                                                          | ** ** | **2003** | ** ** | **2004**(1) | ** ** | **2005**(2) | ** ** | **2006** | ** ** |
| ** **                                                  | ** ** | **(In thousands, except per share data and site counts)** | ** ** |
| **Income  Statement Data:**                                 | ** ** | ** **                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues:                                                   |       |                                                                                              |       |   |   |   |   |   |   |   |   |
| Fuel                                                        |       | $                                                                                                 | 1,237,989  |   | $ | 1,513,648 |   | $ | 1,959,239 |   | $ | 3,231,853 |   | $ | 3,905,128 |   |
| Non-fuel                                                    |       | 617,342                                                                                           |       | 649,502 |   | 707,958 |   | 833,500 |   | 868,380 |   |
| Rent and royalties                                          |       | 15,539                                                                                            |       | 13,080 |   | 10,667 |   | 9,943 |   | 10,006 |   |
| Total revenues                                              |       | 1,870,870                                                                                         |       | 2,176,230 |   | 2,677,864 |   | 4,075,296 |   | 4,783,514 |   |
| Income from operations                                      |       | 51,937                                                                                            |       | 59,977 |   | 69,285 |   | 86,324 |   | 95,542 |   |
| Net income (loss)                                           |       | 1,271                                                                                             |       | 8,891 |   | 14,862 |   | (2,095 | ) | 31,033 |   |
| Income (loss) from continuing operations per common  share: |       |                                                                                              |       |   |   |   |   |   |   |   |   |
| Basic                                                       |       | $                                                                                                 | 0.18       |   | $ | 1.32 |   | $ | 2.14 |   | $ | (0.30 | ) | $ | 4.47 |   |
| Diluted                                                     |       | $                                                                                                 | 0.18       |   | $ | 1.26 |   | $ | 2.04 |   | $ | (0.30 | ) | $ | 4.09 |   |
| ** **                                                  | ** ** | ** **                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Balance  Sheet Data (end of period):**                    |       |                                                                                              |       |   |   |   |   |   |   |   |   |
| Total assets                                                |       | $                                                                                                 | 660,767    |   | $ | 650,567 |   | $ | 897,729 |   | $ | 939,704 |   | $ | 995,592 |   |
| Long term debt (net of unamortized discount)                |       | 523,934                                                                                           |       | 502,033 |   | 682,892 |   | 675,638 |   | 668,734 |   |
| Redeemable equity                                           |       | 681                                                                                               |       | 1,909 |   | 1,864 |   | 1,935 |   | 13,403 |   |
| **Other  Operating Data:**                                  | ** ** | ** **                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total diesel fuel sold (in thousands of gallons)            |       | 1,349,741                                                                                         |       | 1,341,125 |   | 1,338,020 |   | 1,575,460 |   | 1,645,958 |   |
| Total gasoline sold (in thousands of gallons)               |       | 160,560                                                                                           |       | 191,104 |   | 182,921 |   | 195,946 |   | 204,307 |   |
| Number of sites (end of period):                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |
| Company operated sites                                      |       | 122                                                                                               |       | 126 |   | 138 |   | 139 |   | 140 |   |
| Franchisee operated sites                                   |       | 20                                                                                                |       | 14 |   | 12 |   | 10 |   | 10 |   |
| Franchisee owned and operated sites                         |       | 10                                                                                                |       | 10 |   | 10 |   | 11 |   | 13 |   |
| Total network  sites                                        |       | 152                                                                                               |       | 150 |   | 160 |   | 160 |   | 163 |   |

 

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Notes to SelectedFinancial Data

(1)               Includes theoperating results of 11 sites our predecessor acquired on December 1, 2004,beginning on the acquisition date.

(2)               In connection witha refinancing our predecessor completed during 2005, our predecessor recognizedexpenses of $39,566.

**Item 7.**  ***Management’s Discussionand Analysis of Financial Condition and Results of Operations***

**Overview**

We were formed in October 2006 as a Delawarelimited liability company. We were formed as a 100% owned subsidiary of HospitalityTrust to succeed to the operating business of TravelCenters ofAmerica, Inc. which we refer to as our predecessor and which HospitalityTrust acquired on January 31, 2007. Until January 31, 2007, we operated as ashell company subsidiary of Hospitality Trust.

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Because of the restructuring and spin off, thehistorical financial information of our predecessor is not indicative of ourfuture financial position, results of operations or cash flows. You should readthe following discussion in conjunction with our historical and pro formafinancial statements and the financial statements of our predecessor includedelsewhere in this Annual Report on Form 10-K.

Our revenues and income are subject to potentiallymaterial changes as a result of the market prices of diesel fuel and gasoline,as well as the availability of these products. These factors are subject to theworldwide crude oil supply chain, which historically has incurred shocks as aresult of, among other things, severe weather, political crises, wars and othermilitary actions and variations in demand, which are often the result ofchanges in the macroeconomic environment. Over the past few years there hasbeen a significant increase in the cost of diesel fuel and gasoline as crudeoil demand increased during the economic recovery in the United States andevents such as Hurricane Katrina affected the supply system. These significantincreases in our costs for these products can largely be passed on to ourcustomers, but the volatility in the crude oil and refined products markets canresult in shorter term negative effects on our profitability. We expect thatthe crude oil and refined product markets will continue to be volatile and thatprices for these products will remain at historically high levels for theforeseeable future. We do not expect that this price volatility will have asignificant effect on our results in the foreseeable future. Likewise, while weat times experience short term product availability issues in limited areas ofthe country, we do not expect a material effect on our results of operationsfrom these supply disruptions.

**Composition of our Network**

The changes in thenumber of sites within our network and in their method of operation (companyoperated, franchisee operated or franchisee owned and operated) are significantfactors influencing our results of operations. The following table summarizesthe changes in the composition of our predecessor’s network fromDecember 31, 2003 through December 31, 2006:
|                                                        | ** ** | **Company  Operated  Sites** | ** ** | **Franchisee  Operated  Sites** | ** ** | **Franchisee  Owned and  Operated  Sites** | ** ** | **Total  Sites** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|-------------------------------------------------|------------|------------------|------------|
| Number of sites  at December 31, 2003                  |       | 126                          |       | 14                              |       | 10                                              |       | 150              |       |
|                                                   |       |                         |       |                            |       |                                            |       |             |       |
| 2004 Activity:                                         |       |                         |       |                            |       |                                            |       |             |       |
| New sites                                              |       | 12                           |       | —                          |       | —                                          |       | 12               |       |
| Sales of sites                                         |       | (2                           | )          | —                          |       | —                                          |       | (2               | )          |
| Conversions of leased sites to company operated  sites |       | 2                            |       | (2                              | )          | —                                          |       | —           |       |
| Number of sites  at December 31, 2004                  |       | 138                          |       | 12                              |       | 10                                              |       | 160              |       |
|                                                   |       |                         |       |                            |       |                                            |       |             |       |
| 2005 Activity:                                         |       |                         |       |                            |       |                                            |       |             |       |
| New Sites                                              |       |                         |       | —                          |       | 1                                               |       | 1                |       |
| Sales of sites                                         |       | (1                           | )          | —                          |       | —                                          |       | (1               | )          |
| Conversions of leased sites to company operated  sites |       | 2                            |       | (2                              | )          | —                                          |       | —           |       |
| Number of sites  at December 31, 2005                  |       | 139                          |       | 10                              |       | 11                                              |       | 160              |       |
|                                                   |       |                         |       |                            |       |                                            |       |             |       |
| 2006 Activity:                                         |       |                         |       |                            |       |                                            |       |             |       |
| New sites                                              |       | 1                            |       | —                          |       | 2                                               |       | —           |       |
| Number of sites at  December 31, 2006                  |       | 140                          |       | 10                              |       | 13                                              |       | 163              |       |

 

In March 2007, wecompleted construction of and opened for business a new company operated travelcenter.  During 2006, our predecessorentered into an agreement with a prospective franchisee under which we expectto add one franchisee owned and operated location to our network in the secondquarter of 2007.

**HistoricalResults of Operations for Our Predecessor**

For the yearsended December 31, 2004, 2005, and 2006, our predecessor’s revenues and grossprofit were as follows:

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| ** **                                   | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                   | ** ** | **2004**                                   | ** ** | **2005** | ** ** | **2006** | ** ** |
|                                         |       |                                       |       |   |   |   |   |
| Revenues:                                    |       |                                       |       |   |   |   |   |
| Fuel                                         |       | 73.2                                       | %          | 79.3 | % | 81.6 | % |
| Non-fuel                                     |       | 26.4                                       | %          | 20.5 | % | 18.2 | % |
| Rent and royalties                           |       | 0.4                                        | %          | 0.2 | % | 0.2 | % |
| Total revenues                               |       | 100.0                                      | %          | 100.0 | % | 100.0 | % |
| Gross profit  (excluding depreciation):      |       |                                       |       |   |   |   |   |
| Fuel                                         |       | 19.2                                       | %          | 20.6 | % | 21.8 | % |
| Non-fuel                                     |       | 78.8                                       | %          | 77.8 | % | 76.7 | % |
| Rent and royalties                           |       | 2.0                                        | %          | 1.6 | % | 1.5 | % |
| Total gross  profit (excluding depreciation) |       | 100.0                                      | %          | 100.0 | % | 100.0 | % |

 

***Same Site Results Comparisons***

As part of the discussion and analysis of ourpredecessor’s operating results we refer to increases and decreases in resultson a same site basis. For purposes of these comparisons, a travel center isincluded in same site comparisons only for the period for which it was open forbusiness under the same method of operation (company operated, franchiseeoperated or franchisee owned and operated) in both years being compared. Travelcenters are not excluded from the same site comparisons as a result ofexpansions in their square footage or in the services offered.

***Relevance of FuelRevenues and Fuel Volumes***

Due to market pricing of fuel products and the pricingarrangements with fuel customers, fuel revenue is not a reliable metric foranalyzing our predecessor’s results from period to period. As a result solelyof changes in crude oil and refined products market prices, our fuel revenuemay increase or decrease significantly, in both absolute amounts and on apercentage basis, without a comparable change in fuel sales volumes or in grossprofit per gallon. We consider fuel volumes to be a better measure ofcomparative performance than fuel revenues.

***Year endedDecember 31, 2006 Compared to Year ended December 31, 2005***

*Revenues. *Our predecessor’s revenuesfor the year ended December 31, 2006, were $4,783.5 million, whichrepresents an increase from the year ended December 31, 2005, of $708.2 million,or 17.4%, that was primarily attributable to an increase in fuel revenue.

Fuel revenue for the year ended December 31, 2006,increased by $673.3 million, or 20.8%, as compared to the same period in2005. The increase was principally the result of increased average sellingprices for both diesel fuel and gasoline, but also resulted from increases insales volumes for both diesel fuel and gasoline. Average diesel fuel andgasoline sales prices for the year ended December 31, 2006, increased by 15.6%and 16.3%, respectively, as compared to 2005, reflecting increased worldwidedemand and political unrest in oil producing regions of the world. Ourpredecessor’s diesel fuel and gasoline sales volumes for the year endedDecember 31, 2006, increased 4.5% and 4.3%, respectively, as compared to thesame period in 2005. For the year ended December 31, 2006, our predecessor sold1,646.0 million gallons of diesel fuel and 204.3 million gallons ofgasoline, as compared to 1,575.5 million gallons of diesel fuel and195.9 million gallons of gasoline for the year ended December 31, 2005.The diesel fuel sales volume increase of 70.5 million gallons resultedfrom a 7.7% increase in same site diesel fuel sales volumes and a net increasein sales volumes at company operated sites added to or eliminated from thenetwork during 2005 and 2006, somewhat offset by a decrease in wholesale dieselfuel sales volumes. The gasoline sales volume increase of 8.4 million gallonswas primarily attributable to a 3.4% increase in same site gasoline salesvolumes and a net increase in sales volumes at company operated travel centersadded to or eliminated from the network during 2005 and 2006, somewhat offsetby a 3.2 million gallon, or 96.7% decrease in wholesale gasoline salesvolumes. We believe the same site diesel fuel and gasoline sales volumeincreases resulted from our predecessor’s fuel marketing strategies as well asits strong non-fuel products and services offerings.  Fuel revenues were 81.6% of our predecessor’stotal revenues for 2006 as compared to 79.3% for 2005, principally as a resultof higher fuel prices in 2006.

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Non-fuel revenues for the year ended December 31,2006, of $868.4 million included an increase of $34.9 million, or4.2%, as compared to the same period in 2005. The increase was the result of a3.6% increase in same site non-fuel revenues and the increased sales at companyoperated travel centers added to our predecessor’s network in 2005 and 2006. Webelieve the same site increase reflected increased customer traffic resulting,in part, from the capital improvements that our predecessor made to its travelcenters and also from our predecessor’s fuel marketing strategy.  Non-fuel revenues were 18.2% of ourpredecessor’s total revenues for 2006 as compared to 20.5% for 2005,principally as a result of higher fuel prices in 2006.

Rent and royalty revenues for the year ended December31, 2006, increased $0.1 million, or 0.6%, as compared to the same period in2005. This was attributable to the offsetting effects of rent and royaltyrevenue lost as a result of the conversions of two leased sites to companyoperated sites during 2005, the initial and continuing franchise fees relatedto three franchisee owned and operated sites added to the network in 2005 and2006, and increases in both rent and royalty revenues on a same site basis.Royalty revenue increased 2.7% on a same site basis and there was a 3.9%increase in same site rent revenue.

* Cost of goods sold (excludingdepreciation).* Cost of goods sold for the year ended December31, 2006, was $4,123.4 million, an increase of $672.7 million, or19.5%, as compared to the same period in 2005 that was primarily attributableto an increase in fuel cost.

Fuel cost for the year ended December 31, 2006,increased by $659.1million, or 21.2%, as compared to the same period in 2005.The increase was attributable principally to increased market prices for ourpredecessor’s purchases of diesel fuel and gasoline, but also resulted from theincreases in sales volumes for both diesel fuel and gasoline as describedabove. Average diesel fuel and gasoline purchase prices for the year endedDecember 31, 2006, increased by 15.9% and 17.9%, respectively, as compared tothe same period in 2005, reflecting increases in commodity prices that wereattributable to higher crude oil costs due to increased worldwide demand andpolitical unrest in oil producing regions of the world.

Non-fuel cost of goods sold for the year endedDecember 31, 2006, of $361.9 million included an increase of$13.6 million, or 3.9%, as compared to the same period in 2005. Thisincrease was primarily attributable to the increased level of non-fuel salesdescribed above.

*Site level operating expenses.*   Site level operating expenses included thedirect expenses of company operated sites and the ownership costs of franchiseeoperated sites.  Our predecessor’s sitelevel operating expenses increased by $6.4 million, or 1.6%, to$415.9 million for the year ended December 31, 2006, compared to$409.5 million for the same period in 2005. This increase resulted from a$16.7 million, or 4.2% increase on a same site basis and a net increaseresulting from company operated travel centers added to or eliminated from ourpredecessor’s network during 2005 and 2006, which increases were somewhatoffset by a $4.4 million net reduction of operating expense recognized inJune 2006 upon the settlement of certain claims as described below underthe heading “Other income (expenses), net” and a $1.3 million reduction ofexpenses recognized in December 2006 resulting from the final settlement withthe government in connection with the 2005 seizure of funds by the governmentin a legal dispute concerning revenues we received from a vendor operatingcertain video games alleged by the government to be illegal gambling devices.During 2005, our predecessor recognized expense of $5.3 million in connectionwith the seizure. The same site increase was primarily related to the increasedcosts necessary to support the increased level of non-fuel sales and alsoreflected higher credit card transaction fees associated with increases in fuelcosts and an increase in energy costs. On a same site basis, site leveloperating expenses as a percentage of non-fuel revenues for the year endedDecember 31, 2006 were 49.6%, compared to 49.4% for the same period in 2005,reflecting the effects of increased credit card transaction fees and utilitycosts.

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*Selling, general and administrative expenses.*  Selling, general and administrative expensesincluded corporate overhead and administrative costs and for the year endedDecember 31, 2006, were $61.3 million, representing a $8.3 million, or15.6% increase from the same period in 2005 that was primarily attributable topersonnel costs and share based compensation expense. Personnel costs for theyear ended December 31, 2006 increased $3.8 million over the same period in2005 due to both increases in the number of employees and salaryincreases.  Share based compensationexpense for the year ended December 31, 2006, increased by $3.0 millionover the same period of 2005. The increased level of share based compensationexpense in 2005 as compared to 2006 resulted from the number of performancestock options that vested in the 2006 period in combination with an increase inthe estimated value of those options.

*Real estate lease rent expense.* Realestate lease rent expense for the year ended December 31, 2006 was $11.0million as compared to $10.9 million for the year ended December 31, 2005. Thisincrease of $0.1 million, or 1.2% was primarily due to increases in rents uponexercise of renewal options.

*Depreciation and amortizationexpense.*   Depreciationand amortization expense for the year ended December 31, 2006, was$71.9 million, as compared to $65.0 million for the same period in2005, an increase of $6.9 million, or 10.6%. This increase resulted fromour predecessor’s investments in additional depreciable assets in 2005 and 2006and an increased level of asset abandonments during 2006 that was largelyrelated to two sites that were razed in preparation for rebuilding.

*Merger and refinancing expenses.*   During the year ended December 31, 2006, ourpredecessor recognized a charge of $4.9 million related to expensesincurred in marketing itself for sale, primarily costs related to debtfinancings that were not pursued to completion.

*Gain on asset sales.*  For the year ended December 31, 2006, thegain on asset sales of $0.5 million primarily was generated from the saleof excess land, while the gain on asset sales of $0.2 million for the yearended December 31, 2005, primarily was generated from the sale of one companyoperated travel center.

*Income from operations.*   Our predecessor generated income fromoperations of $95.5 million for the year ended December 31, 2006, comparedto income from operations of $86.3 million for the same period in 2005.This increase of $9.2 million, or 10.7%, was primarily the result of theincreased gross profit that resulted from increased fuel and non-fuel salesvolumes and increased fuel margin per gallon and non-fuel gross profitpercentage. The increased gross profit was somewhat offset by increasedoperating expenses.

*Other income (expense), net.*   In 2006 our predecessor reachedsettlements of two claims made in connection with transactions that occurred in2000. Our predecessor incurred $1.2 million of expenses in the 2006 periodprior to the settlement in pursuit of these claims. As a result of thesettlements, which totaled $6.9 million, our predecessor recognized $5.6 millionas a reduction of operating expenses because it represented the recovery ofrelated expenses that had been incurred in 2006 and prior years. The remaining$1.3 million of the settlement amounts represented a gain on claimsettlements and was recognized in non-operating income. During the year endedDecember 31, 2005, our predecessor incurred $39.6 million of expenses inconnection with a refinancing and recognized a gain on sale of investment of$2.0 million in 2005. This gain was related to the 2004 sale of an equityinvestment and was recognized in 2005 when the last portion of sales proceedswas released from escrow as a result of the resolution of certaincontingencies.

*Interest and other financial costs,net. * Interest and other financial costs, net, forthe year ended December 31, 2006, of $47.5 million decreased by$1.0 million, or 2.1%, compared to the same period in 2005. This decreaseresulted from a reduction in our predecessor’s weighted average effectiveborrowing rates as a result of its June 2005 refinancing.

*Income taxes. * Our predecessor’s effective income tax ratesfor the years ended December 31, 2005 and 2006, were 1,079.0% and 37.1%,respectively. These rates differed from the federal statutory rate dueprimarily to state income taxes partially offset by the benefit of certain taxcredits and for 2005, the effect of the nondeductibility

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of a $5.3 million charge described above in “Sitelevel operating expenses.” The difference in these effective tax rates betweenthe 2006 period and the 2005 period was primarily the result ofchanges in effective state tax rates and the effect of the nondeductibility ofthe $5.3 million charge in 2005.  As aresult of our predecessor’s near break even pre-tax income for 2005 of $0.2million, the nondeductibility of the $5.3 million charge that was expensed inarriving at the pre-tax income had a much larger relative effect on theeffective tax rate in 2005 than would have been the case in 2006 when thepre-tax income was $49.3 million.

***Year ended December 31,2005 Compared to Year ended December 31, 2004***

*Revenues. * Our predecessor’s revenues for 2005 were$4,075.3 million, which represented an increase from 2004 of$1,397.4 million, or 52.2%, that was the result of increases in both fuelrevenue and non-fuel revenues. The fuel and non-fuel revenue increases are inpart the result of the addition of eleven travel centers acquired inDecember 2004 and in part the result of factors described below.

Fuel revenue for 2005 increased by$1,272.6 million, or 65.0%, as compared to 2004. The increase wasprincipally from increased average selling prices for both diesel fuel andgasoline. These prices increased by 43.7% and 28.2%, respectively, as comparedto 2004, reflecting increases in commodity prices resulting from higher crudeoil costs due to increased worldwide demand, refinery outages and other refinedpetroleum product supply disruptions, including the effects of hurricanesKatrina and Rita in late 2005. Diesel fuel and gasoline sales volumes for 2005increased 17.7% and 7.1%, respectively, as compared to 2004. In 2005, ourpredecessor sold 1,575.5 million gallons of diesel fuel and195.9 million gallons of gasoline, as compared to 1,338.0 milliongallons of diesel fuel and 182.9 million gallons of gasoline sold in 2004.The diesel fuel sales volume increase of 237.4 million gallons primarilyresulted from a 115.4 million gallon net increase in sales volume attravel centers that our predecessor added to or eliminated from its networkduring 2004 and 2005, and a 9.3% increase in same site diesel fuel salesvolumes. Our predecessor also increased sales volume of wholesale diesel fuelin 2005 by 18.8 million gallons, or 20.6%, over the 2004 level. Thegasoline sales volume increase of 13.0 million gallons, or 7.1%, wasprimarily attributable to a 14.8 million gallon net increase in salesvolumes at company operated travel centers our predecessor added to oreliminated from its network during 2004 and 2005, and a 0.2% increase in samesite gasoline sales volumes, partially offset by a 2.4 million gallondecrease in wholesale gasoline sales volumes. We believe the same site dieselfuel sales volume increase resulted from an expanded freight market in 2005 andour predecessor’s fuel marketing strategies, somewhat offset by an increase inthe level of freight carried by train instead of truck and an increase intrucking fleets’ self fueling at their own terminals due to wide fluctuationsin, and high levels of, diesel prices in 2005. Our predecessor believed the samesite increase in gasoline sales volume resulted primarily from increasedmotorist visits to our travel centers as a result of our predecessor’s moreaggressive retail gasoline pricing program as well as site improvements made aspart of our predecessor’s capital investment program, partially offset by thenegative effects on motorist purchases caused by the high prices and the supplydisruptions resulting from hurricanes Katrina and Rita in late 2005. We believethe decreases in wholesale sales volumes for both diesel and gasoline resultedfrom the volatility in commodity prices during 2005, coupled with the highlevel of commodity prices and our predecessor’s decision to be less active inwholesale gasoline sales. Fuel revenues were 79.3% of our predecessor’s totalrevenues for 2005 as compared to 73.2% for 2004, principally as a result ofhigher fuel prices.

Non-fuel revenues for 2005 of $833.5 millionreflected an increase of $125.5 million, or 17.7%, as compared to 2004.The increase was primarily attributable to the $73.3 million net increasein sales at the company operated travel centers our predecessor added to oreliminated from its network during 2004 and 2005 and also was attributable to a7.3% increase in same site non-fuel revenues. We believe the same siteincreases reflected increased customer traffic resulting, in part, from thecapital improvements that our predecessor made to upgrade its travel centers,from an expanded freight market and from our predecessor’s competitive fuelmarketing strategies. Non-fuel revenues were 20.5% of our predecessor’s totalrevenues for 2005 as compared to 26.4% for 2004, principally as a result ofhigher fuel prices.

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Rent and royalty revenues for 2005 decreased$0.7 million, or 6.8%, as compared to 2004, attributable to the rent androyalty revenue lost as a result of the conversions of four leased travelcenters to company operated travel centers during 2004 and 2005. This decreasewas partially offset by a 5.3% increase in same site royalty revenue and a 3.6%increase in same site rent revenue.

*Cost of goods sold (excludingdepreciation).*  Cost ofgoods sold for 2005 were $3,450.8 million, which represents an increasefrom 2004 of $1,303.8 million, or 60.7%, that was primarily attributableto an increase in fuel cost.

Fuel cost for 2005 increased by $1,245.4 million,or 67.1%, as compared to 2004. The increase was attributable principally toincreased market prices for our predecessor’s purchases of diesel fuel andgasoline, but also resulted from the increases in sales volumes for both dieselfuel and gasoline that were described above. Average diesel fuel and gasolinepurchase prices for 2005 increased by 45.6% and 29.3%, respectively, ascompared to 2004, reflecting increases in commodity prices that were attributableto higher crude oil costs due to increased worldwide demand and politicalunrest in oil producing regions of the world and supply disruptions caused byhurricanes Katrina and Rita.

Non-fuel cost of goods sold for 2005 of$348.3 million included an increase of $58.4 million, or 20.1%, ascompared to 2004. This increase is primarily attributable to the increasedlevel of non-fuel sales described above.

*Site level operating expenses.*  Site level operating expenses increased by$63.2 million, or 18.2%, to $409.5 million for 2005 compared to$346.3 million for 2004. This increase was primarily attributable to a netincrease resulting from travel centers that our predecessor added to oreliminated from its network during 2004 and 2005, and a 4.0% increase on a samesite basis. The increase was also due in part to a $5.3 million charge ourpredecessor recorded in 2005 in connection with a seizure of funds by thegovernment in a legal dispute concerning revenues we received from a vendoroperating certain video games alleged by the government to be illegal gamblingdevices.

*Selling, general and administrative expenses.* Selling, general and administrative expensesfor 2005 were $53.1 million, which reflected a $9.9 million, or22.9%, increase from 2004 that was primarily attributable to stock compensationcosts. Stock compensation expense for 2005 was $8.9 million, primarilyrelated to the vesting of performance stock options. Stock compensation expensefor 2004 was $0.1 million. The remaining $1.0 million increase wasprimarily due to increased personnel costs, partially resulting from theaddition of sites in late 2004.

*Depreciation and amortizationexpense. * Depreciation and amortization expense for 2005was $65.0 million, compared to $58.8 million for 2004, an increase of$6.2 million, or 10.6%, that was primarily due to travel centers acquiredin December 2004, as well as other capital additions purchasedin 2004 and 2005.

*Real estate lease rent expense.* Real estate lease rent expense for the year ended December 31, 2005 was $10.9million as compared to $15.9 million for the year ended December 31, 2004. Thisdecrease of $5.0 million, or 31.4% was primarily due to the termination,effective December 1, 2004, of the master lease agreement under which ourpredecessor leased eight travel centers at an expense for the first elevenmonths of 2004 of $5.1 million. At the termination of this lease, ourpredecessor acquired the related assets.

*(Gain) loss on asset sales.*   For 2005, gain on asset sales of $0.2 millionarose primarily from the sale of a travel center and excess land, while gain onasset sales of $2.5 million for 2004 was generated primarily from the saleof two company operated travel centers, one closed travel center and ourpredecessor’s fractional shares of three aircraft.

*Income from operations. *Our predecessor generatedincome from operations of $86.3 million for 2005, compared to income fromoperations of $69.3 million for 2004. This increase of $17.0 million,or 24.6%, as compared to 2004 was primarily attributable to the increased levelof gross margin which was partially offset by the increased level of expenses,especially stock compensation expense and the write off related to funds seizedby the government as described above.

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*Other income (expense), net.*   Until April 2004, our predecessor owned21.5% of an equity investee and recognized $0.2 million in 2004 as itsequity share of the investee’s earnings. There were no such investees in 2005.Our predecessor’s gain on sale of investment of $2.0 million for 2005resulted from the 2004 sale of an equity investment. During 2004, a gain of$1.6 million was recognized when the transaction closed, and an additionalgain was recognized in 2005 when the last portion of sales proceeds was releasedfrom escrow as a result of the resolution of certain contingencies. For 2005,our predecessor recognized $39.6 million of debt extinguishment andrefinancing expenses in connection with refinancing transactions in that year.For 2004, our predecessor recognized $1.7 million of debt extinguishmentand refinancing expenses in connection with 2004 refinancing transactions.

*Interest and other financial costs,net.*   Interest andother financial costs, net, for 2005 increased by $2.5 million, or 5.3%,compared to 2004. This increase primarily resulted from the increased level ofinterest rates in 2005 as compared to 2004.

*Income taxes.*   Our predecessor’s effective income tax ratesfor the years ended December 31, 2004 and 2005 were 36.3% and 1,079.0%, respectively.These rates differed from the federal statutory rate due primarily to state andforeign income taxes partially offset by the benefit of certain tax creditsand, for 2005, the effect of the nondeductibility of the $5.3 million chargeresulting from the seizure of funds by the government. The difference in theseeffective tax rates between 2005 and 2004 was primarily the result of changesin effective state tax rates and the effect of the nondeductibility of the $5.3million charge in 2005.  As a result ofour predecessor’s near break even pre-tax income for 2005 of $0.2 million, thenondeductibility of the $5.3 million charge that was expensed in arriving atthe pre-tax income had a much larger relative effect on the effective tax ratein 2005 than would have been the case in 2004 when the pre-tax income was $23.3million.

***RipGriffin Acquisition – Pro Forma Information***

On December 1,2004, our predecessor acquired from Rip Griffin Truck Service Center, Inc. theassets related to eleven travel centers.  The results from these eleven sites wereincluded in our predecessor’s results, as discussed above, from that date.  The following unaudited pro forma informationpresents our predecessor’s results of operations as if the acquisition of theRip Griffin sites had taken place on January 1, 2004.
|                                                         | ** ** | **Year Ended  December 31, 2004** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                              | ** ** | **(in Millions of Dollars)**      | ** ** |
|                                                    |       |                                             |       |
| Total revenue                                           |       | $                                                | 2,880.0    |   |
| Gross profit                                            |       | $                                                | 577.9      |   |
| Income before  extraordinary item and accounting change |       | $                                                | 18.1       |   |
| Net income                                              |       | $                                                | 18.1       |   |

 

These pro formaresults of operations have been prepared for comparative purposes only and donot purport to be indicative of the results of operations that actually wouldhave resulted had the acquisition occurred on January 1, 2004, or that mayresult in the future.

**Critical Accounting Policies of OurPredecessor**

The preparation of our predecessor’s financialstatements in accordance with accounting principles generally accepted in theU.S. required our predecessor to make estimates and judgments that affect thereported amounts of assets, liabilities, revenues and expenses and relateddisclosure of contingent assets and liabilities. The critical accountingpolicies employed by our predecessor in the preparation of its consolidatedfinancial statements are those which involve allowances for doubtful accountsand notes receivable, asset impairment, reserves for self insurance,environmental liabilities, income tax accounting and recognition of stockcompensation expense.

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Our predecessor maintained its allowances for doubtfulaccounts and notes receivable based on historical payment patterns, aging ofaccounts receivable, periodic review of customers’ financial condition, andactual write off history. If the financial condition of customers were todeteriorate, resulting in an impairment of their ability to make payments,additional allowances may be required.

Our predecessor’s accounting policies requiredrecording impairment losses on long lived assets to reduce the carrying valueof certain assets to their fair value. This could occur under our predecessor’spolicies in two types of cases: (1) when assets were used in operations,events and circumstances indicated that the assets might be impaired and theundiscounted cash flows estimated to be generated by those assets were lessthan the carrying value of those assets; and (2) when assets were to bedisposed of and their carrying value exceeded the estimated fair value of theasset less the estimated cost to sell the asset. Estimated cash flows werebased on historical results adjusted to reflect the best estimate of futuremarket and operating conditions. The estimates of fair value represent the bestestimate based on industry trends and reference to market rates and transactions.

Our predecessor has not recognized an impairmentcharge with respect to any of its intangible assets. Our predecessor assessedgoodwill for impairment; for these purposes, our predecessor determined that itwas one reporting unit and that the estimated fair value of that reportingunit, based on a discounted cash flow analysis, exceeded its carrying value.With respect to trademark intangible assets, the estimated fair value, based ona discounted cash flow analysis, exceeded the carrying value. A number ofassumptions and methods are used in preparing the valuations underlying theseimpairment tests, including estimates of future cash flows and discount rates.Applying significantly different assumptions or valuation methods could resultin different results of these impairment tests. Similarly, defining thereporting unit differently could lead to a different result for goodwill. Thegoodwill and trademark intangible assets were assessed for impairment annuallyas of January 1 of each year.

Our predecessor was partially self insured withrespect to general liability, workers’ compensation, motor vehicle and grouphealth benefits claims up to certain stop loss amounts ranging from $100,000 to$500,000. Provisions established under these partial self insurance programswere made for both estimated losses on known claims and claims incurred but notreported, based on claims histories. The most significant risk of thismethodology is its dependence on claims histories, which is not alwaysindicative of future claims. To the extent an estimate is inaccurate, expensesand net income will be understated or overstated. Although some variation toactual results occurs, historically such variability has not been material. Forthe years ended December 31, 2004, 2005 and 2006, our predecessor’saggregate provisions amounted to $25.3 million, $25.8 million, and$26.1 million, respectively. For the years ended December 31, 2004,2005 and 2006, our predecessor paid $23.9 million, $25.4 million and$27.5 million, respectively, on claims related to these partial selfinsurance programs. At December 31, 2005 and 2006, our predecessor’saggregated liability related to these partial self insurance programs was$12.2 million and $10.8 million, respectively, which our predecessorbelieved was adequate to cover both reported and incurred but not reportedclaims.

Our predecessor established or adjusted environmentalcontingency reserves when the responsibility to remediate became probable andthe amount of associated costs was reasonably determinable.

As part of the process of preparing its consolidatedfinancial statements, our predecessor was required to estimate income taxes ineach of the jurisdictions in which it operated. The process involved estimatingactual current tax expense along with assessing temporary differences resultingfrom differing treatment of items for financial statement and tax purposes.These timing differences resulted in deferred tax assets and liabilities, whichwere included in our predecessor’s consolidated balance sheet. Our predecessorwas required to record a valuation allowance to reduce its deferred tax assetsif it was not able to conclude that it was more likely than not these assetswould be realized.

Any or all of these policies, applied in the futurewith the benefit of additional facts or better estimates which were not knownor available at the time the various required evaluations were made, couldresult in revisions to estimated liabilities, adjustments to reduce assets totheir fair value or recognition of expenses.

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The criticalaccounting policies of our predecessor described above are also our criticalaccounting policies. Accounting for leases is an additional critical accountingpolicy of ours.  Each time we enter a newlease or materially modify an existing lease we evaluate its classification aseither a capital lease or an operating lease. The classification of a lease ascapital or operating affects whether and how the transaction is reflected inour balance sheet, as well as our recognition of rental payments as rent orinterest expense. These evaluations require us to make estimates of, amongother things, the remaining useful life and market value of a leased property,appropriate discount rates and future cash flows. Incorrect assumptions orestimates may result in misclassification of our leases. These policies involvesignificant judgments based upon our experience, including judgments aboutcurrent valuations, ultimate realizable value, estimated useful lives, andsalvage or residual values.  In thefuture we may need to revise our assessments to incorporate information whichis not known at the time of our previous assessments, and such revisions couldincrease or decrease our depreciation expense related to properties that welease, result in the classification of some of our leases as other thanoperating leases or decrease the carrying values of some of our assets.

Our predecessor was also reliant upon other accountingpolicies which it considered critical, but which we believe are unlikely tohave continuing importance to us, including policies regarding accounting foragreements under which certain members of our predecessor’s managementpurchased shares of our predecessor’s stock which was subject to redemptionunder certain conditions and for options to purchase our predecessor’s stockwhich were granted to certain members of our predecessor’s management. Each ofthese accounting policies was complicated by the fact that our predecessor’sstock was privately held, subjecting the related accounting to subjectivevaluation estimates.

*Change in Accounting Principle*

Effective January 1, 2006, our predecessoradopted Statement of Financial Accounting Standards (FAS) No. 123(R), “Share-BasedPayment” (FAS 123R), which replaced FAS No. 123, “Accounting forStock based Compensation,” and superseded Accounting Principles Board OpinionNo. 25 (APB 25), “Accounting for Stock Issued to Employees.” FAS 123Rrequires compensation cost relating to share based payment transactions be recognizedin the financial statements. Our predecessor adopted FAS 123R using theprospective approach; accordingly, prior periods were not restated. There wasno effect on our predecessor’s balance sheet or results of operations as aresult of the adoption of FAS 123R. Prior to January 1, 2006, ourpredecessor measured compensation costs related to share based payments underAPB 25, as permitted by FAS 123, and provided pro forma disclosure in thenotes to financial statements as required by FAS 123 and FAS 148.FAS 123R does not allow the pro forma disclosure previously permitted byFAS 123.

Under APB 25, our predecessor accounted for employeeshare options using the intrinsic value method of accounting. For share optionsthat vested based on the passage of time, no share based compensation cost wasreflected in our predecessor’s consolidated statements of operations becausefor all of such options the exercise price equaled the estimated market valueof the underlying share on the date of grant. For share options that vestedbased on attaining specified financial return performance targets, no sharebased compensation cost was reflected in our predecessor’s consolidatedstatements of operations until such time as attaining of the targets wasdetermined to be probable, which was not the case for the options granted underthe 2001 stock plan until the fourth quarter of 2005. Our predecessor has notgranted options since the adoption of FAS 123R, but in April 2006 itmodified certain outstanding options and, accordingly, began accounting forthese modified options as prescribed by FAS 123R. As a result, ourpredecessor has recognized share based compensation expense with respect tothese modified stock options in the financial statements for the year ended December31, 2006.

*Recently Issued AccountingPronouncements*

*FIN 48.*   In June 2006 the FASB issuedInterpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN48). FIN 48 is effective for fiscal years beginning after December 15,2006. FIN 48 prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. Under this guidance, a benefit can berecognized with respect

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to a tax position only if it is more likely than notthat the position will be sustained upon examination. In such cases, the taxposition is to be measured at the largest amount of benefit that is greaterthan 50% likely of being realized upon ultimate settlement. We are in theprocess of evaluating what, if any, effect adoption of FIN 48 will have on ourfinancial statements, but do not expect that the effect will be material to ourfinancial position, results of operations or cash flows when FIN 48 isadopted effective January 1, 2007.

*SAB 108.*  In September 2006, the Securities andExchange Commission issued Staff Accounting Bulletin No. 108, “Considering theEffects of Prior Year Misstatements when Quantifying Misstatements in CurrentYear Financial Statements” (SAB 108). SAB 108 requires a “dual approach” for quantifications of errors usingboth a method that focuses on the income statement impact, including thecumulative effect of prior years’ misstatements, and a method  that focuses on the period end balance sheet.  SAB 108 was effective for us and ourpredecessor on December 31, 2006.  Therewas no material impact on our or our predecessor’s financial statements as aresult of adopting SAB 108.

*FAS 157.*   In September 2006, the FASB issuedStatement of Financial Accounting Standards No. 157, “Fair ValueMeasurements” (FAS 157). FAS 157 is effective for fiscal yearsbeginning after November 15, 2007. FAS 157 defines fair value,establishes a framework for measuring fair value in generally acceptedaccounting principles, and expands disclosures about fair value measurements,but does not require any new fair value measurements. We are in the process ofevaluating what, if any, effect adoption of FAS 157 may have on ourfinancial statements when FAS 157 is adopted effective January 1,2008.

*FAS 159.*  In February 2007, the FASB issued Statementof Financial Accounting Standards No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (FAS 159).  FAS 159 is effective for fiscal yearsbeginning after November 15, 2007.  FAS159 permits companies to measure many financial instruments and certain otherassets and liabilities at fair value on an instrument by instrument basis.  FAS 159 also establishes presentation anddisclosure requirements to facilitate comparisons between companies that selectdifferent measurement attributes for similar types of assets andliabilities.  We are in the process ofevaluating what, if any, effect adoption of FAS 159 may have on ourfinancial statements when FAS 159 is adopted effective January 1,2008.

**Liquidity and Capital Resources**

Our predecessor’s historical cash flows are notindicative of what we anticipate our future cash flows will be. On a historicalbasis our predecessor’s expenditures, including those for debt service, capitalexpenditures and working capital, were provided by its operating cash flow assupplemented from time to time by borrowings under its revolving creditfacility. As a result of the restructuring and spin off, our principalliquidity requirements will be to meet our operating expenses, including rentto Hospitality Trust, our capital expenditures and our working capitalrequirements.

Our sources of liquidity to meet these requirementswill be our operating cash flow, our cash balance and our ability to drawcapital improvement funding under the terms of our lease with HospitalityTrust.

The primary risks we face with respect to ouroperating cash flow include decreased demand for our products and services,including that which may be caused by the volatility of prices of petroleumbased products. A reduction of our revenue without an offsetting reduction inour operating expenses may cause us to use our cash at a rate which we cannotsustain for extended periods. Also, a significant increase in the prices wemust pay to obtain fuel may increase our cash requirements for working capital.

We anticipate that we will be able to fund our workingcapital needs and capital expenditures in the short term with funds generatedby our operations and from our ability to draw improvement funding under theterms of our lease with Hospitality Trust. We also expect that funds generatedby our operations and from our ability to draw improvement funding under theterms of our lease with Hospitality Trust will be sufficient to fund our longerterm liquidity requirements, and that we will supplement these sources, asnecessary, to fund other capital projects, including our developmentactivities, with our cash balances.

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Over the longer term, we may seek to sell and leaseback travel centers that we own, develop or acquire. Also, we expect to seek arevolving credit facility secured by some or all of our assets to supplementour sources of liquidity. Based upon current market conditions, we believe thatsuch a credit facility may be available to us.

**Off Balance Sheet Arrangements**

As of December 31, 2006, our predecessor did not haveany off balance sheet arrangements, and we have no present intention to enterany such arrangements.

**Summary of Pro Forma ContractualObligations and Commercial Commitments**

The following table summarizes our December 31,2006, pro forma expected obligations to make future required payments undervarious agreements.
| ** **                       | ** ** | **Payments due by period**   | ** ** |
|----------------------------------|------------|---------------------------------------------|------------|
| ** **                       | ** ** | **Total**                                   | ** ** | **2007** | ** ** | **2008-2009** | ** ** | **2010-2011** | ** ** | **Thereafter** | ** ** |
| ** **                       | ** ** | **(In Millions of Dollars)** | ** ** |
|                             |       |                                        |       |   |   |   |   |   |   |   |   |
| Long term debt (1)               |       | $                                           | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Lease with Hospitality Trust (2) |       | 2,731.5                                     |       | 153.5 |   | 318.0 |   | 335.0 |   | 1,925.0 |   |
| Other operating leases           |       | 120.0                                       |       | 13.6 |   | 23.1 |   | 19.0 |   | 64.3 |   |
| Other long term liabilities      |       | 19.9                                        |       | 7.7 |   | 7.2 |   | 2.9 |   | 2.1 |   |
| Total  contractual obligations   |       | $                                           | 2,871.4    |   | $ | 174.8 |   | $ | 348.3 |   | $ | 356.9 |   | $ | 1,991.4 |   |

 

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(1)                                  Allof our predecessor’s debt was repaid in connection with the Hospitality Trustacquisition.

(2)                                  Thesepro forma amounts are presented as if the lease with Hospitality Trustcommenced on January 1, 2007.

Our predecessor’s $21.6 million of letters ofcredit were its primary outstanding trade commitments as of December 31,2006. Until we have established a credit facility as described above, we havesecured these letters of credit with a cash deposit of $22.6 million.  As of December 31, 2006, our predecessoralso had a commitment to purchase a parcel of land for $0.6 million.

**Seasonality**

We believe our business is modestly seasonal. Ourrevenues during a year are often lowest in the first quarter when movement offreight by professional truck drivers and motorist travel are historically attheir lowest seasonal levels. Our revenues in the fourth quarter of a year areoften somewhat lower than those of the second and third quarters because, whilethe fourth quarter is often positively impacted by increased movement offreight in preparation for various national holidays, that positive impact isoften more than offset by a reduction in freight movement caused by vacationtime associated with those holidays taken by professional truck drivers.

**Inflation and Deflation**

Inflation in the past several years in the U.S. hasbeen modest. Future inflation might have both positive or negative impacts onour business. Rising price levels may allow us to increase revenues, but mayalso impact our operating costs. Our revenues may change by either more or lessthan the rate of change in our expenses. Because a large component of ourexpenses will consist of fixed rental obligations to Hospitality Trust, we maynot be able to fully capitalize on declines in general price levels ordeflation.

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**EnvironmentalMatters**

We operateunderground storage tanks and aboveground storage tanks at company operatedsites that must comply with Environmental Laws. We have estimated the currentranges of remediation costs at currently active sites and what we believe willbe our ultimate share for those costs and, as of December 31, 2006,our predecessor had a reserve of $10.8 million for unindemnified environmentalmatters for which we are responsible, a receivable for estimated recoveries ofthese estimated future expenditures of $4.4 million and $4.4 million of cash inan escrow account to fund certain of these estimated expenditures, leaving anestimated net amount of $2.0 million to be funded from our future operatingcash flows.  We estimate that the grosscash outlays related to the matters for which we have accrued this reserve willbe approximately $4.2 million in 2007; $2.5 million in 2008; $1.5 million in2009; $1.2 million in 2010; $0.8 million in 2011 and $0.6 millionthereafter.  These cash expenditureamounts do not reflect any amounts for the expected recoveries as we cannotaccurately predict the timing of those cash receipts.  Under the environmental agreement enteredinto as part of the acquisition of the BP network, BP is required to provideindemnification for, and conduct remediation of, certain pre-closing environmentalconditions.  Our lease with HospitalityTrust requires us to indemnify Hospitality Trust for environmental claims atour sites leased from Hospitality Trust.

**Item 7A.**  ***Quantitative andQualitative Disclosures About Market Risk***

We have no obligations for funded debt and presentlyare not directly affected by changes in market interest rates. However, we mayseek to obtain a line of credit secured by some or all of our receivables andinventory. We expect that such a line of credit would bear interest for fundedamounts at floating rates. We may from time to time consider our exposure tointerest rate risks if we have or expect to have material amounts of floatingrate obligations, and we may decide to purchase interest rate caps or otherhedging instruments.

We are exposed to risks arising from market pricechanges for fuel. These risks have historically resulted from changes inavailable supplies of fuel. Some of these changes may arise from localconditions, such as a malfunction in a particular pipeline or at a particularterminal. However, most of these risks arise from national or internationalconditions, such as weather related shut downs of oil drilling or refiningcapacities, political instability in oil producing regions of the world orterrorism. Almost all of these risks are beyond our control. These risks mayalso arise from changes in the demand for fuel, particularly those changes fromincreases and decreases in economic activities. Because petroleum products are traded in commodity markets, materialchanges in demand for fuel worldwide, such as the recent increases in fueldemand in China, may have a material impact upon the prices we have to pay forfuel.

We attempt to mitigate our exposure to fuel pricemarket risks in four ways. First, we maintain supply contracts for diesel fuelwith several different suppliers for each of our travel centers; if onesupplier has a local problem we may be able to obtain fuel supplies from othersuppliers. Second, we maintain modest fuel inventories, generally about threedays of fuel sales; modest inventories may mitigate the risk that we sell fuelfor less than its cost in the event of rapid price declines. Third, we sell amajority of our diesel fuel at contracted prices determined as cents per gallonabove a benchmark which is reflective of the market costs for fuel; by sellingon such terms we may be able to maintain our margin per gallon despite changesin the price we pay for fuel. Finally, we may from time to time purchase orsell futures contracts for fuel.

**Item 8.**  ***Financial Statements andSupplementary Data***

The information requiredby this item is included in Item 15 of this Annual Report on Form 10-K.

**Item 9.**  ***Changes in andDisagreements With Accountants***

None.

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**Item 9A.**  ***Controls and Procedures***

As ofthe end of the period covered by this report, our management carried out anevaluation, under the supervision and with the participation of our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of ourdisclosure controls and procedures pursuant to Exchange Act Rules 13a-15 andRule 15d-15.  Based upon that evaluation,our Chief Executive Officer and our Chief Financial Officer concluded that ourdisclosure controls and procedures were effective.

Therewere changes in our internal control over financial reporting during thequarter ended December 31, 2006 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.  During the quarter endedDecember 31, 2006, our predecessor implemented controls that remediated amaterial weakness related to our predecessor’s accounting for stock basedcompensation expense that was identified during the review of our predecessor’sfinancial statements for the interim period ended September 30, 2006.

This annual reportdoes not include a report of management’s assessment regarding internal controlover financial reporting or an attestation report of the company’s registeredpublic accounting firm because such a report is not required by establishedrules of the Securities and Exchange Commission for newly public companies.

**Item 9B.**  ***Other Information***

None.

**PART III**

**Item 10.**  ***Directors, ExecutiveOfficers and Corporate Governance***

**MANAGEMENT**

The following table lists the names, ages andpositions of our directors and our executive officers as of March 15, 2007:
| **Name**                | ** ** | **Age** | ** ** | **Position**                                                                         |
|-------------------------|------------|---------|------------|--------------------------------------------------------------------------------------|
|                    |       |    |       |                                                                                 |
| Barry M. Portnoy        |       | 61      |       | Managing Director (term  will expire in 2008)                                        |
| Thomas M.  O’Brien |       | 40      |       | Managing Director (term  will expire in 2009), Chief Executive Officer and President |
| Arthur G. Koumantzelis  |       | 76      |       | Independent Director  (term will expire in 2008)                                     |
| Barbara D.  Gilmore     |       | 56      |       | Independent Director  (term will expire in 2009)                                     |
| Patrick F.  Donelan     |       | 64      |       | Independent Director  (term will expire in 2010)                                     |
| John R. Hoadley         |       | 35      |       | Executive Vice  President, Chief Financial Officer and Treasurer                     |
| Larry W. Dockray        |       | 55      |       | Executive Vice  President of Operations                                              |
| Peter P. Greene         |       | 42      |       | Executive Vice  President of Real Estate Acquisitions and Development                |
| Michael J.  Lombardi    |       | 55      |       | Executive Vice  President of Sales                                                   |
| Joseph A. Szima         |       | 54      |       | Executive Vice  President of Marketing                                               |

 

**Directors**

Our board of directors consists of five membersdivided into three classes, with each class serving for a staggered three yearterm. At each annual meeting of our shareholders, a class of directors will beelected for a three year term to succeed the directors of the same class whoseterms are then expiring. There are no voting agreements or other contractualarrangements relating to the election of the members of our board.

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Our LLC agreement categorizes our board of directorsinto “Managing Directors” who are active in our day to day business and “IndependentDirectors” who are independent of our management as independence is defined inour LLC agreement and the applicable rules of the principal stock exchange onwhich our securities are listed. Our LLC agreement requires that a majority ofour board of directors be independent directors.

**Managing Directors**

*Barry M. Portnoy*serves as one of our Managing Directors. Mr. Portnoy has been one of themanaging trustees or directors of Hospitality Trust, HRPT Properties Trust, orHRPT Properties, Senior Housing Properties Trust, or Senior Housing, and FiveStar Quality Care, Inc., or Five Star, since each began business in 1995,1986, 1999 and 2001, respectively. Mr. Portnoy has been a director andowner of RMR Advisors, Inc. and a trustee of each of the funds it managessince their founding beginning in 2003, including RMR Real Estate Fund, RMRHospitality and Real Estate Fund, RMR F.I.R.E. Fund, RMR Preferred DividendFund and RMR Asia Pacific Real Estate Fund, collectively the RMR Funds.Mr. Portnoy has been a director and owner of Reit Management since itbegan business in 1986. From 1978 through March 1997, Mr. Portnoy wasa partner of the law firm of Sullivan & Worcester LLP.  Mr. Portnoy is a Group I director andwill serve until our 2008 annual meeting of shareholders.

*Thomas M. O’Brien*serves as one of our Managing Directors and as of President and Chief ExecutiveOfficer.  Mr. O’Brien has been SeniorVice President of Reit Management since 2006 and was Vice President of ReitManagement prior to that time since 1996. Mr. O’Brien has been thePresident and a Director of RMR Advisors, Inc. and President and ChiefExecutive Officer of each of the RMR Funds since their founding beginning in2003. From 2002 through 2003, Mr. O’Brien served as Executive VicePresident of Hospitality Trust, where he had previously served as Treasurer andChief Financial Officer since 1996. Prior to 1996 Mr. O’Brien was a seniormanager with Arthur Andersen LLP. Mr. O’Brien is a Group II director andwill serve until our 2009 annual meeting of shareholders.

**Independent Directors**

The following individuals serve on our board ofdirectors as Independent Directors:

*Arthur G. Koumantzelis*has been the President and Chief Executive Officer of Gainesborough InvestmentsLLC, a private investment company, since 1998. Mr. Koumantzelis also hasbeen a director of Five Star since 2001. Mr. Koumantzelis was a trustee ofHospitality Trust from 1995 until his resignation in January 2007 prior toour spin off. Mr. Koumantzelis has been a trustee of each of the RMR Fundssince their founding. Mr. Koumantzelis was a trustee of Senior Housingfrom 1999 until his resignation in 2003. Mr. Koumantzelis was formerly thechief financial officer of Cumberland Farms, Inc., a company engaged inthe convenience store business and the sale of petroleum products principallyunder the name “Gulf Oil” and related trademarks. Mr. Koumantzelis is aGroup I director and will serve until our 2008 annual meeting of shareholders.

*Barbara D. Gilmore*has served as a clerk to Judge Joel B. Rosenthal of the United StatesBankruptcy Court, Western Division of the District of Massachusetts, since2001. Ms. Gilmore was a partner of the law firm of Sullivan &Worcester LLP from 1993 to 2000. Ms. Gilmore has been a director ofFive Star since 2004. Ms. Gilmore is a Group II director and will serveuntil our 2009 annual meeting of shareholders.

*Patrick F. Donelan*has been principally employed as a private investor since December 2003.Mr. Donelan has been a trustee of HRPT Properties since 1998.Mr. Donelan was the Non-Executive Chairman and member of the advisoryboard until 2003, and was Chief Executive Officer through 2002, of eSecLending(Europe) Ltd, a London based privately owned company in the business ofmanaging securities lending programs for institutional owners of publicly ownedsecurities. Prior to its acquisition by Dresdner Bank in 1995, Mr. Donelanwas Chairman of Kleinwort Benson (North America) Inc., the U.S. basedsubsidiary of Kleinwort Benson Limited, a United Kingdom based bank. At thetime of his retirement in 2001, Mr. Donelan was a Managing Director atDresdner Kleinwort Wasserstein, the U.K. based investment banking subsidiary ofDresdner Bank of Germany. Mr. Donelan is a Group III director and willserve until our 2010 annual meeting of shareholders.

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**Executive Officers**

The following individuals were our officers as ofMarch 15, 2007:

*Thomas M. O’Brien*is our President and Chief ExecutiveOfficer, in addition to being a Managing Director as described above.

*John R. Hoadley* isour Executive Vice President, Chief Financial Officer and Treasurer.Mr. Hoadley has been Senior Vice President of Reit Management since 2006and was Vice President prior to that time since 2001. Mr. Hoadley has beenTreasurer and Chief Financial Officer of Senior Housing since 2001. From 1999to 2001, Mr. Hoadley served as the Controller of Hospitality Trust. Priorto 1998, Mr. Hoadley was a senior accountant with Arthur Andersen LLP.Mr. Hoadley is a certified public accountant.

*Larry W. Dockray*is our Executive Vice President of Operations. Mr. Dockray served ourpredecessor in this capacity since November 2006 and as a Regional VicePresident prior to that since 1993. Prior to joining TravelCenters ofAmerica, Inc. Mr. Dockray spent nine years as a district managerfirst with The Standard Oil Company of Ohio, or Sohio, and then with BP.

*Peter P. Greene* isour Executive Vice President of Real Estate Acquisitions and Development.Mr. Greene served our predecessor in this capacity since January 2007, asa Senior Vice President of Development and Franchising since 2003, as VicePresident of Strategic Development prior to that from January 2001 and invarious other positions prior to that time since 1996. Prior to 1996, he spenttwo years with Tosco Corporation (subsequently merged into what is nowConocoPhillips) and nine years with BP in various management positions.

*Michael J. Lombardi*is our Executive Vice President of Sales. Mr. Lombardi served ourpredecessor in this capacity since January 2007 and as Senior Vice President ofSales prior to that since June 2006. Prior to joining TravelCenters ofAmerica, Inc. Mr. Lombardi spent seven years in senior positions inthe global marketing and customer service divisions of Ford Motor Company;prior to that he spent thirteen years in the retail marketing division of BP.

*Joseph A. Szima* isour Executive Vice President of Marketing. Mr. Szima served ourpredecessor in this capacity since January 2007, as Senior Vice President andAssistant Secretary prior to that from March 2004, and as a Regional VicePresident prior to that since 1996. Prior to joining our predecessor,Mr. Szima spent ten years with BP in various management positions.

Each of our executive officers is elected by, andserves at the discretion of, the board of directors. Each of our executiveofficers except Messrs. O’Brien and Hoadley will devote his full time toour affairs. Messrs. O’Brien and Hoadley will devote at least 80% of theirbusiness time to our affairs and the balance to the business of ReitManagement, where they each continue to serve as senior vice presidents.

Until February 27, 2007, Timothy L. Doane was our Presidentand Chief Executive Officer, and James W. George was our Executive VicePresident, Chief Financial Officer and Secretary.  As of that date, Messrs. Doane and Georgeresigned as officers of the Company and its subsidiaries. Mr. Doane served usor our predecessors as President and Chief Executive Officer since 2005, asPresident and Chief Operating Officer prior to that from July 2003, as SeniorVice President of Marketing prior to that from January 2001 and in variousother positions prior to that since 1995. Mr. George served us or our predecessors as Executive VicePresident, Chief Financial Officer and Secretary, since 2003, as Senior VicePresident, Chief Financial Officer and Secretary prior to that from 1997 and invarious other positions prior to 1997 since 1993.

Until January 31, 2007, John G. Murray was ourpresident and Mark L. Kleifges was our treasurer. Messrs. Murray andKleifges resigned those positions as of the completion of the spin off.Mr. Murray is president of Hospitality Trust and has been for the lastfive years. Mr. Kleifges is treasurer and chief financial officer ofHospitality Trust and has been since 2002. Until 2002, Mr. Kleifges was apartner with Arthur Andersen LLP for more than nine years.

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**Committees of the Board of Directors**

Our board of directors has established threecommittees, including an audit committee, a compensation committee and anominating and governance committee. Each of the these committees is comprisedof Mr. Koumantzelis, Ms. Gilmore and Mr. Donelan, who areindependent of us under applicable AMEX listing standards and under the charterof each respective committee and, in the case of the audit committee, theindependence requirements of the SEC. Copies of the charters of our audit,compensation and nominating and governance committees are posted on ourwebsite, www.tatravelcenters.com.

·               *AuditCommittee.* The responsibilities of our audit committee are to selectour independent registered public accounting firm and to assist our board infulfilling its responsibilities for oversight of: (1) the integrity of ourfinancial statements; (2) our compliance with legal and regulatoryrequirements; (3) the independent registered public accounting firm’squalifications and independence; and (4) the performance of our internalaudit function. All members of our audit committee are “independent” as definedby the rules of the SEC and the AMEX.

·               *CompensationCommittee.* Our compensation committee’s responsibilities include:(1) evaluating the services provided by, and compensation paid by us to,individuals who serve as our executive officers and our director of internalaudit; (2) evaluating compensation paid to employees; (3) reviewing,evaluating and approving our management and shared services agreement with ReitManagement; and (4) the evaluation and administration of, and approval ofgrants under, our equity compensation plans, which may also be administered byour board of directors. All members of our compensation committee are “independent”as defined by the rules of the SEC and the AMEX.

·               *Nominatingand Governance Committee.* The responsibilities of our nominating andgovernance committee include: (1) identification of individuals qualifiedto become members of our board and recommending to the board the directornominees for each annual meeting of shareholders or when vacancies occur; and(2) development and recommendation to the board of a set of governanceprinciples. All members of our nominating and governance committee are “independent”as defined by the rules of the SEC and the AMEX.

**Financial Expert**

Our board has designated Mr. Koumantzelis as thefinancial expert serving on our audit committee in accordance with applicableAMEX and SEC rules. We believe Mr. Koumantzelis is qualified to serveas a financial expert because of his experience as a member of the auditcommittees of other publicly owned companies, as the chief financial officer ofa company which was required to file reports with the SEC and as a certifiedpublic accountant who was responsible for auditing companies which filed SECreports.

**Compensation of Directors**

For their services as directors, we will pay eachindependent director an annual fee of $25,000, plus a fee of $500 for eachboard and committee meeting attended to a maximum of $1,000 per day. Inaddition, for their services as directors, each director will receive an annualgrant of 1,500 of our common shares in 2007 and following each annual meetingof shareholders commencing in 2008. Board members will not be separatelycompensated for serving on board committees; however, we will pay each boardmember serving as chairman of our audit committee, compensation committee andnominating and governance committee an additional annual fee of $7,500, $2,500and $2,500, respectively. We will reimburse directors for reasonable out ofpocket expenses incurred in attending meetings of the board of directors orboard committees on which they serve. Messrs. Portnoy and O’Brien, ourManaging Directors, will not receive any cash compensation for their servicesas directors or as members of board committees, but they will receive annualshare grants and they will be reimbursed for their expenses.

Neither we nor our predecessor paid compensation toour respective directors in or for 2006.

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**Proceduresfor the nomination by shareholders of candidates to serve as directors**

Our Amended and Restated Limited Liability CompanyAgreement, or our LLC Agreement, provides that nominations of persons forelection to our board of directors and other business may only be considered atour shareholders meetings if the nominations or other business are included inthe notice of the meeting made or proposed by our board of directors or made orproposed by a shareholder who:

·                  is a shareholder of record at the time of givingnotice of the nomination or the business to be considered;

 

·                  is a shareholder of record entitled to voteat the meeting at which the nomination or business is to be considered;

 

·                  is a shareholder of record at the time of themeeting and physically present in person at the meeting to answer questionsabout the nomination or business; and

 

·                  hascomplied in all respects with the advance notice provisions for shareholdernominations and other business set forth in our LLC agreement and in any bylawsadopted by our board.

Under our LLC agreement, a shareholder’s notice ofnominations for director or business to be transacted at an annual meeting ofshareholders must be delivered to our secretary at our principal office notlater than the close of business on the 90th day, and not earlier than theclose of business on the 120th day, prior to the first anniversary of the dateof mailing of our notice for the preceding year’s annual meeting. If the dateof mailing of our notice of the annual meeting is advanced or delayed by morethan 30 days from the anniversary date of the mailing of our notice forthe preceding year’s annual meeting, a shareholder’s notice must be deliveredto us not earlier than the close of business on the 120th day prior to themailing of notice of such annual meeting and not later than the close ofbusiness on the later of: (1) the 90th day priorto the date of mailing of the notice for an annual meeting, or (2) the10th day following the day on which we first make a public announcement of thedate of such meeting. The public announcement of a postponement of the mailingof the notice for an annual meeting or of an adjournment or postponement of anannual meeting to a later date or time will not commence a new time period forthe giving of a shareholder’s notice. If the number of directors to be electedto our board of directors at a shareholders meeting is increased and we make nopublic announcement of such action or do not specify the size of the increasedboard of directors at least 100 days prior to the first anniversary of thedate of mailing of notice for our preceding year’s annual meeting, ashareholder’s notice also will be considered timely, but only with respect tonominees for any new positions created by such increase, if the notice isdelivered to our secretary at our principal office not later than the close ofbusiness on the 10th day following the day on which such public announcement ismade. This provision does not apply to new directors who are elected by theboard of directors to fill a vacancy, including a vacancy created by boardaction which increases the number of directors.

For special meetings of shareholders, our LLC agreementrequires a shareholder who is nominating a person for election to our board ofdirectors at a special meeting at which directors are to be elected to givenotice of such nomination to our secretary at our principal office not earlierthan the close of business on the 120th day prior to such special meeting andnot later than the close of business on the later of: (1) the 90th dayprior to such special meeting or (2) the 10th day following the day onwhich public announcement is first made of the date of the special meeting andof the nominees proposed by our board of directors to be elected at suchmeeting. The public announcement of a postponement or adjournment of a specialmeeting to a later date or time will not commence a new time period for thegiving of a shareholder’s notice as described above.

Any notice from a shareholder of nominations for directoror business to be transacted at a shareholders meeting must be in writing andinclude the following:

·                  as to each person nominated for election orreelection as a director, (1) the person’s name, age, business andresidence addresses, (2) the principal occupation or employment of theperson for the past five years, (3) the class or series and number ofshares beneficially owned or owned of record by the person and

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(4) allother information relating to the person that is required to be disclosed insolicitations of proxies for election of directors or otherwise required byRegulation 14A under the Securities Exchange Act of 1934, as amended,together with the nominee’s written consent to being named in the proxystatement as a nominee and to serving as a director if elected;

·                  as to other business that the shareholderproposes to bring before the meeting, a brief description of the business, thereasons for considering the business and any interest in the business of theshareholder giving the notice and of the beneficial owner, if any, on whosebehalf the proposal is made; and

·                  as to the shareholder giving the notice andthe beneficial owner, if any, on whose behalf the nomination or proposal ismade, the name and address of the shareholder and beneficial owner and theclass and number of each class or series of our shares which (s)he or they ownbeneficially and of record.

We may request that any shareholder proposing a nomineefor election to our board of directors provide, within three business days ofsuch request, written verification of the accuracy of the information submittedby the shareholder.

Shareholder nominations fordirectors which are properly made in accordance with the foregoing rules willbe considered by our nominating and governance committee and by our board; and,if they are endorsed by our board, they will be included in our proxysolicitation. Shareholder nominations which are properly made but are notendorsed by our board will not appear in our proxy solicitation unlessotherwise required by law. Shareholder proposals other than nominations whichare properly made in accordance with the foregoing rules will be considered byour nominating and governance committee and by our board, and they will appearon our proxy solicitation if they are endorsed by our board or if they aresupported by at least twenty-five percent (25%) of the shares entitled tovote regarding the proposal (or such lesser amount as applicable law mayestablish for inclusion in the proxy solicitation, if any). Whether or notincluded in our proxy solicitation, shareholder nominations or proposals whichare properly made may be considered at a shareholders meeting.

**Code of Business Conduct and Ethics**

We have a code ofbusiness conduct and ethics that applies to all our employees, including ourofficers and directors and employees of RMR. Our code of business conduct andethics is posted on our website, www.tatravelcenters.com.  A printed copy of our code of businessconduct and ethics is also available free of charge to any shareholder whorequests a copy. We intend to disclose any amendments or waivers to our code ofbusiness conduct and ethics applicable to our principal executive officer,principal financial officer, principal accounting officer or controller (or anyperson performing similar functions) on our website.

**Item11.  *Executive Compensation***

**Executive Compensation**

We are recently organized and did not pay anycompensation to our executive officers or directors prior to the spin off.

**Compensation Committee Report**

We,the members of the compensation committee of the Company, have reviewed anddiscussed the Compensation Discussion and Analysis with the Company’smanagement.  Based upon this review anddiscussion, the compensation committee recommended to the board of trusteesthat the Compensation Discussion and Analysis be included in the Annual Reporton Form10-K.
|        | COMPENSATION COMMITTEE     |
|--------|----------------------------|
|   | Barbara D.  Gilmore, Chair |
|   | Patrick F.  Donelan        |
|   | Arthur G.  Koumantzelis    |

 

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***CompensationDiscussion and Analysis***

We are newly formed and paid no amounts to ourexecutive officers until after the spin off. Consequently, the consideration ofour compensation programs to date has been limited. The compensation committeeof our board of directors has been formed only recently.

The compensation of our executive officers who wereemployees of our predecessor has been set largely by reference to thehistorical level of compensation paid to them by our predecessor, and, in thecase of Mr. Szima and Steven C. Lee, our Senior Vice President and GeneralCounsel, by reference to their employment contracts. The compensation ofMessrs. O’Brien and Hoadley was set largely by reference to the historicallevels of compensation paid to them by Reit Management.  Also because at least 80% of Messrs. O’Brien’sand Hoadley’s business time is devoted to services to us and they remainofficers and employees of Reit Management, approximately 80% of Messrs. O’Brien’sand Hoadley’s cash compensation is paid by us and 20% is paid by ReitManagement.

Notwithstanding the consideration of compensation byreference to the historical practices and to assumed contracts, our board ofdirectors has formed a compensation committee as described above.  We expect to more fully develop ourcompensation plans going forward by using a combination of data regardinghistorical pay and publicly available compensation data for public companiesthat are engaged in our industry, in related industries, or that possess sizeor other characteristics which are similar to ours. We also expect to considerother factors, including but not limited to:

·     theindividual’s background, training, education and experience;

·               the individual’s role with us and thecompensation paid to individuals in similar roles in the companies we considerto have characteristics similar to ours;

·     themarket demand for specific expertise possessed by the individual;

·     thegoals and expectations for the individual’s position and his or her success inachieving these goals; and

·               a comparison of the individual’s pay tothat of other individuals within the company and the relative responsibilities,titles, roles, experiences and capabilities of such other individuals.

We expect the mix of base salary, cash bonus andequity compensation that we pay to our executive officers to vary depending onposition and do not expect our compensation committee to follow a set formulaor specific guidelines in determining how to allocate among the compensationcomponents.

*CompensationComponents*

The components of our compensation package are asfollows:

*Base Salary*

Base salaries for our executives are expected to bereviewed annually as part of our compensation program and adjusted, ifappropriate, based upon each executive’s past and expected future contributionsto us. We expect that we will also adjust base salaries, as warranted, forpromotions and other changes in the executive’s role which may occur from timeto time.

As described below, our prior employment agreementswith Messrs. Doane and George have been replaced. The replacement agreementswith Messrs. Doane and George continue their current base salary through August31, 2007 and provide for certain specified lump sum payments to them.

*Annual Bonus*

Each of our executives is eligible to receive anannual performance based cash bonus.

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Mr. O’Brien’s annual bonus will be reviewed andapproved by our compensation committee, composed of only independent directors,who are expected to base their review and decisions upon their considerationand evaluation of his performance during the year.  Considerations may include, but may not belimited to company financial and market performance, company growth andstrategic initiatives.

Mr. Hoadley’s annual bonus will be reviewed by ourcompensation committee as provided in their charter and approved by our boardof directors who are expected to base their review and decisions upon theirconsideration and evaluation of his performance during the year.  Considerations may include, but may not belimited to company financial and market performance, company growth andstrategic initiatives.

For other executives, our predecessor has historicallyset annual bonus targets by establishing various objectives for each individual,including objectives related to company financial performance, capitalexpenditures, vendor, customer and industry relations, safety measures, productimprovement, network growth and improvement and others.  Actual bonuses may differ from target bonusesbased upon the level of achievement of individual objectives.  For most of our executives, we haveestablished an additional target bonus which can be earned if objectives aremet and certain company financial objectives are exceeded.  We may or may not continue these practicesgenerally for 2007 but have not finalized the 2007 objectives.  In January 2007, our predecessor paidthe target bonuses for 2006 to each executive and we believe it will bereasonably likely that target bonuses may be achieved for 2007.

No target bonus has been established for Mr. O’Brienor Mr. Hoadley.  For other executives, atarget bonus has been established, consistent with the past practice of ourpredecessor, and is stated as a percentage of base salary of between 50% and 100%,including 75% for Mr. Szima and 65% for Mr. Lee.  The target bonus for Messrs. Szima and Lee isset by the terms of their respective employment contracts.

As described below, under our revised employmentagreements with Messrs. Doane and George, they are no longer eligible for anannual cash bonus and will instead receive certain specified lump sum payments.

*Equity Incentive Plan*

As described in “—Our Equity Compensation Plan”, wehave adopted the TravelCenters of America LLC 2007 Equity Compensation Plan. Weexpect to make equity awards under this plan based upon factors which ourcompensation committee deems relevant to align the longer term interests of ourshareholders and our executives.

*Perquisites and Other Benefits*

Our executive officers are entitled to participate inour benefit plans on the same terms as our other employees.  These plans include medical, dental and lifeinsurance plans and a defined contribution plan. Pursuant to their employmentagreements, each of Mr. Szima and Mr. Lee are entitled to a car allowance andto the reimbursement of membership dues at a social club.  We believe that our predecessor put the carallowance and club membership reimbursement in place in order to instillloyalty and to incentivize the executive officers.  We intend to examine whether these programsare necessary and effective for these purposes.

*Employment Contracts*

TravelCenters of America, Inc., our predecessor,had employment agreements with each of Messrs. Doane and George, whichhave been replaced with revised agreements as set forth below.

As of the date of our restructuring and the spin off,we assumed our predecessor’s employment agreements with Messrs. Szima andLee.  Pursuant to their respectiveemployment agreements, for 2006, Mr. Szima’s annual base salary was$325,000 and Mr. Lee’s annual base salary was $300,000. Each of theseexecutives is eligible to receive an annual cash bonus determined by the boardof directors, or its delegate, based on individual and company performanceobjectives as described above. Each of the employment agreements provides foran initial two year term with automatic one year extensions at the end of eachyear through age 65. Notice of non-renewal given to the

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employee before December 31 of any year willresult in expiration of the employment agreement effective December 31 ofthe year following the year in which notice was given.  Based upon the terms of these contracts,after our acquisition of our predecessor, notice of non-renewal can not resultin expiration of the employment agreement sooner than the December 31following the second anniversary of the change of control. In the case ofcertain types of separations from the company, each employment agreementcontains terms which provide for cash payments of two times the executive’sthen current base salary and target bonus. Each executive has agreed to refrainfrom competing with us during his employment and during any period during whichhe is receiving payments following his termination.

On February 27, 2007, Mr. Doane, our former Presidentand Chief Executive Officer and Mr. George, our former Executive VicePresident, Chief Financial Officer and Secretary resigned as officers of ours.Each of Messrs. Doane and George terminated his existing employment agreementand entered into a new employment agreement with us. Messrs. Doane and Georgeagreed to remain in our employ and to devote all of their business time andeffort to our affairs through August 31, 2007. Messrs. Doane and George furtheragreed to make themselves reasonably available to the Company thereafter on anas needed basis through August 31, 2008. As part of his new employmentagreement, each of Messrs. Doane and George have agreed not to compete with usfor a period which ends August 31, 2010. Mr. Doane will be paid his currentsalary, at a rate of $700,000 per annum, through August 31, 2007, plus anadditional $4.2 million (including a payment of $3.8 million on August 31,2007, and $350,000 on December 31, 2007) and will receive certain other benefitsfrom us. As part of his new employment agreement, Mr. George will be paid hiscurrent salary, which is at a rate of $450,000 per annum, until August 31,2007, plus an additional $2.4 million (including a payment of $2.1 million onAugust 31, 2007, and $225,000 on December 31, 2007) and will receive certainother benefits from us.

Other than pursuant to these agreements, we do notprovide severance or retirement benefits for our executive officers.

***2006 CompensationTables****.*

Each of our executive officers except Messrs. O’Brienand Hoadley was an employee of our predecessor until we acquired it on January31, 2007.  Because we paid nocompensation to any officer or director prior to January 31, 2007, we havepresented 2006 compensation information in the tables below for our predecessor’schief executive officer, chief financial officer and four other persons. Werefer to five of these persons (excluding Mr. Kuhn who was our predecessor’schairman and who has had no employment relationship with us) as our “namedexecutive officers.”  No other executiveofficers who would have otherwise been includable in the following table on thebasis of total compensation earned in 2006 have been excluded by reason oftheir termination of employment or change in executive status during 2006.

**SummaryCompensation Table for 2006**
| **Name and Principal Position**      | ** ** | **Year** | ** ** | **Salary  $** | ** ** | **Bonus  $** | ** ** | **Stock  awards  $** | ** ** | **Option  awards(1)  $** | ** ** | **Non-equity  incentive plan  compensation(2)  $** | ** ** | **Change in  pension value  and non-  qualified  deferred  compensation  earnings  $** | ** ** | **All other  compensation(3)  $** | ** ** | **Total  $** | ** ** |
|-----------------------------------------------------|------------|----------|------------|---------------|------------|--------------|------------|----------------------|------------|--------------------------|------------|---------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|--------------|------------|
| Edwin P. Kuhn(4)                                    |       | 2006     |       | 291,667       |       | —       |       | —               |       | 2,542,331                |       | —                                                  |       | —                                                                                                |       | 78,982                                 |       | 2,912,980    |       |
| Mr. Doane (5)                                       |       | 2006     |       | 650,000       |       | —       |       | —               |       | 1,582,162                |       | 700,000                                                 |       | —                                                                                                |       | 33,357                                 |       | 2,965,519    |       |
| Mr. George (5)                                      |       | 2006     |       | 431,167       |       | —       |       | —               |       | 1,449,173                |       | 337,500                                                 |       | —                                                                                                |       | 35,072                                 |       | 2,252,912    |       |
| Mr. Szima,  Executive Vice President of Marketing   |       | 2006     |       | 306,800       |       | —       |       | —               |       | 614,018                  |       | 243,750                                                 |       | —                                                                                                |       | 20,775                                 |       | 1,185,343    |       |
| Michael H.  Hinderliter (6)                         |       | 2006     |       | 321,250       |       | —       |       | —               |       | 1,197,729                |       | 211,250                                                 |       | —                                                                                                |       | 35,999                                 |       | 1,766,288    |       |
| Mr. Lee, Senior Vice  President and General Counsel |       | 2006     |       | 285,000       |       | —       |       | —               |       | 433,115                  |       | 195,000                                                 |       | —                                                                                                |       | 12,172                                 |       | 925,287      |       |

 

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(1)                                  The assumptions used to calculate the fairvalue of the option awards are set forth in Note 16 to the auditedconsolidated financial statements of TravelCenters of America, Inc. as ofand for the year ended December 31, 2006, which are included elsewhere in thisAnnual Report on Form 10-K. There were no forfeitures of granted options during2006.

(2)           Amounts represent incentive bonuses earned during 2006 that were paid in2007.

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(3)           All other compensation includes the following:
| ** **      | ** ** | **Matching  contributions to  defined  contribution  retirement plan  $** | ** ** | **Insurance  premiums paid on  behalf of executive  $** | ** ** | **Allowance for  automobile  $** | ** ** | **Allowance for club  membership  $** | ** ** |
|-----------------|------------|-------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------------------|------------|
|            |       |                                                                                |       |                                                                        |       |                                  |       |                                            |       |
| Mr. Kuhn        |       | 4,200                                                                               |       | 57,080                                                                      |       | 4,644                                 |       | 13,058                                          |       |
| Mr. Doane       |       | 4,200                                                                               |       | 6,860                                                                       |       | 9,177                                 |       | 13,120                                          |       |
| Mr. George      |       | 4,200                                                                               |       | 8,895                                                                       |       | 5,842                                 |       | 16,135                                          |       |
| Mr. Hinderliter |       | 4,200                                                                               |       | 11,142                                                                      |       | —                                |       | 20,657                                          |       |
| Mr. Szima       |       | 4,200                                                                               |       | 900                                                                         |       | 2,685                                 |       | 12,990                                          |       |
| Mr. Lee         |       | 4,200                                                                               |       | 3,322                                                                       |       | —                                |       | 4,650                                           |       |

 

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(4)                                  Mr. Kuhn was chairman of our predecessor untilthe acquisition of the predecessor on January 31, 2007 and was CEO of ourpredecessor through December 31, 2004.

(5)                                  As described above in “—Employment Contracts”Mr. Doane, our former President and Chief Executive Officer and Mr. George,our former Executive Vice President, Chief Financial Officer and Secretaryresigned as officers of ours on February 27, 2007.  Mr. O’Brien became our president and chiefexecutive officer and Mr. Hoadley became our chief financial officer onFebruary 27, 2007.  We have set the basesalary of each of Messrs. O’Brien and Hoadley to be paid by us at $240,000 perannum; their additional compensation in 2007 will be at the discretion of ourboard of trustees.  Neither we nor ourpredecessor compensated either of Messrs. O’Brien or Hoadley during 2006.

(6)                                  Mr. Hinderliter, who was our Senior VicePresident of Sales and served our predecessor in that capacity, will retire onMarch 31, 2007.

**Grantsof Plan-Based Awards for 2006**
| ** **            | ** ** | ** **      | ** ** | **Estimated future payouts under  non-equity incentive plan  awards(1)** | ** ** | **Estimated future payouts  under equity incentive plan  awards(2)** | ** ** | **All  other  stock  awards:  number  of shares  of stock** | ** ** | **All  other  option  awards:  number of  securities** | ** ** | **Exercise  or base  price of  option** | ** ** | **Grant  Date  Fair  Value of  Stock  and  Option** | ** ** |
|-----------------------|------------|-----------------|------------|---------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|--------------------------------------------------------|------------|---------------------------------------------------|------------|----------------------------------------------------------|------------|
| **Name**              | ** ** | **Grant  Date** | ** ** | **Threshold  $**                                                                                  | ** ** | **Target $**                                                                             | ** ** | **Maxi-   mum $**                                           | ** ** | **Threshold   #**                                 | ** ** | **Target #**                                 | ** ** | **Maxi-  mum #**                                    | ** ** | **or units  #** | ** ** | **underlying  options #** | ** ** | **awards  $/sh(3)** | ** ** | **Awards  $(4)** | ** ** |
| Mr. Kuhn              |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 43,032 |   | $ | 31.75 |   | $ | 2,542,331 |   |
|                  |       | 1/1/2001(4)     |       |  —                                                                                      |       |  —                                                                                  |       |  —                                                          |       |  0                                                |       |  43,032                                      |       |  43,032                                             |       | — |   | — |   | $ | 31.75 |   | $ | 933,794 |   |
|                  |       |            |       |                                                                                              |       |                                                                                          |       |                                                                  |       |                                                   |       |                                              |       |                                                     |       |   |   |   |   |   |   |   |   |
|  Mr. Doane       |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 26,780 |   | $ | 31.75 |   | $ | 1,582,162 |   |
|                  |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       |  0                                                |       | 26,779                                            |       | 26,779                                                   |       | — |   | — |   | $ | 31.75 |   | $ | 581,104 |   |
|                  |       | 1/1/2006        |       |  0                                                                                           |       | 700,000                                                                                       |       | 700,000                                                               |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | — |   | — |   | — |   |
|                  |       |            |       |                                                                                              |       |                                                                                          |       |                                                                  |       |                                                   |       |                                              |       |                                                     |       |   |   |   |   |   |   |   |   |
|  Mr. George      |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 24,529 |   | $ | 31.75 |   | $ | 1,449,173 |   |
|                  |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | 0                                                      |       | 24,529                                            |       | 24,529                                                   |       | — |   | — |   | $ | 31.75 |   | $ | 532,279 |   |
|                  |       | 1/1/2006        |       | 0                                                                                                 |       | 337,500                                                                                       |       | 337,500                                                               |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | — |   | — |   | — |   |
|                  |       |            |       |                                                                                              |       |                                                                                          |       |                                                                  |       |                                                   |       |                                              |       |                                                     |       |   |   |   |   |   |   |   |   |
|  Mr. Szima       |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 10,393 |   | $ | 31.75 |   | $ | 614,018 |   |
|                  |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | 0                                                      |       | 10,393                                            |       | 10,393                                                   |       | — |   | — |   | $ | 31.75 |   | $ | 225,528 |   |
|                  |       | 1/1/2006        |       | 0                                                                                                 |       | 243,750                                                                                       |       | 243,750                                                               |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | — |   | — |   | — |   |
|                  |       |            |       |                                                                                              |       |                                                                                          |       |                                                                  |       |                                                   |       |                                              |       |                                                     |       |   |   |   |   |   |   |   |   |
|  Mr. Hinderliter |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 20,273 |   | $ | 31.75 |   | $ | 1,197,729 |   |
|                  |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | 0                                                      |       | 20,272                                            |       | 20,272                                                   |       | — |   | — |   | $ | 31.75 |   | $ | 439,902 |   |
|                  |       | 1/1/2006        |       | 0                                                                                                 |       | 211,250                                                                                       |       | 211,250                                                               |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | — |   | — |   | — |   |
|                  |       |            |       |                                                                                              |       |                                                                                          |       |                                                                  |       |                                                   |       |                                              |       |                                                     |       |   |   |   |   |   |   |   |   |
|  Mr. Lee         |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | 7,331 |   | $ | 31.75 |   | $ | 433,115 |   |
|                  |       | 1/1/2001(4)     |       | —                                                                                            |       | —                                                                                        |       | —                                                                |       | 0                                                      |       | 7,330                                             |       | 7,330                                                    |       | — |   | — |   | $ | 31.75 |   | $ | 159,061 |   |
|                  |       | 1/1/2006        |       | 0                                                                                                 |       | 195,000                                                                                       |       | 195,000                                                               |       | —                                                 |       | —                                            |       | —                                                   |       | — |   | — |   | — |   | — |   |
|                       |            |                 |            |                                                                                                   |            |                                                                                               |            |                                                                       |            |                                                        |            |                                                   |            |                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  Represents plan cash incentives and excludespayments described below in “—Executive Retention Plan” and “—Other TransactionBenefits”. The maximums shown here were paid by our predecessor in January2007.

(2)                                  Based on the terms of the merger agreementbetween our predecessor and Hospitality Trust, the maximums shown here vestedand were settled on a net cash basis on January 31, 2007.

(3)                                  The exercise price of the options of $31.75represents the estimated market price per share of the underlying shares at thedate of grant. Our predecessor was a privately held company and, accordingly,there was no quoted market price to which to refer at the date of grant.However, the

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grant date of the options was January 1, 2001, which was only 47days subsequent to the merger and recapitalization transaction through whichthe then current owners of the predecessor gained control of our predecessorand the price per share paid in that transaction was $31.75. These merger andrecapitalization transactions are more fully described in Note 16 to theaudited consolidated financial statements of TravelCenters ofAmerica, Inc. as of and for the year ended December 31, 2006, which areincluded elsewhere in this Annual Report on Form 10-K.

(4)                                  These options were granted on January 1, 2001and were amended on April 6, 2006, resulting in a new grant date for FAS 123Raccounting purposes. The grant date fair values shown in the table are as of April6, 2006. The exercise prices were not affected by the amendments.

Base salary comprised 21.9% and cash incentive awardscomprised 18.6% of total compensation paid to our predecessor’s named executiveofficers in 2006. There were no awards made to any of our predecessor’s namedexecutive officers under an equity-based incentive plan in 2006. However, an amendmentmade on April 6, 2006 to equity-based incentive plan awards made in 2001resulted in a new grant date for these awards for FAS 123R accounting purposes.
| ** **            | ** ** | **Outstanding  Equity Awards at Fiscal-Year End for 2006**                       | ** ** |
|-----------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **            | ** ** | ** **                                                                       | ** ** |
| ** **            | ** ** | **Option Awards**                                                           | ** ** | **Stock Awards** | ** ** |
| ** **            | ** ** | **Number of  securities  underlying  unexercised  options  exercisable(1)** | ** ** | **Number of  securities  underlying  unexercised  options  unexercisable** | ** ** | **Equity  incentive  plan awards:  number of  securities  underlying  unexercised  unearned  options(2)** | ** ** | **Option  Exercise  Price** | ** ** | **Option  Expiration  Date** | ** ** | **Number of  shares or  units  of stock that  have not vested** | ** ** | **Market value  of shares or  units  of stock that  have not  vested** | ** ** | **Equity  incentive  plan awards:  number of  unearned  shares,  units or  other rights  that have  not vested** | ** ** | **Equity incentive  plan awards:  market or  payout  value of  unearned  shares, units or  other  rights that have  not vested** | ** ** |
|                  |       |                                                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Mr. Kuhn        |       | 163,521                                                                          |       | — |   | 43,032 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|  Mr. Doane       |       | 100,878                                                                          |       | — |   | 26,779 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|  Mr. George      |       | 92,462                                                                           |       | — |   | 24,529 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|  Mr. Szima       |       | 39,019                                                                           |       | — |   | 10,393 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|  Mr. Hinderliter |       | 76,697                                                                           |       | — |   | 20,272 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|  Mr. Lee         |       | 27,637                                                                           |       | — |   | 7,330 |   | $ | 31.75 |   | 12/31/2010 |   | — |   | — |   | — |   | — |   |
|                       |            |                                                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  The unexercised but exercisable options vestedat various times from January 1, 2001 through April 6, 2006.Approximately 52.3% of the vested options vested on a ratable basis over thefive year period that ended on December 31, 2005. Approximately 21.2% ofthe vested options vested on December 31, 2005 based on achieving aspecified internal rate of return through that date. Approximately 26.5% of thevested options vested on April 6, 2006 as the result of amendments to theoption agreements that were effective as of that date. These amendmentsaffected only the vesting of the options and not the exercise price orexpiration date for those options. The various classes of option grants and therelated vesting are more fully described in Note 16 to the auditedconsolidated financial statements of TravelCenters of America, Inc. as ofand for the year ended December 31, 2006, which are included elsewhere inthis Annual Report on Form 10-K.

(2)                                  The unearned options fully vested as ofJanuary 31, 2007, the date of consummation of the merger of our predecessorinto Hospitality Trust. These options and the related vesting are more fullydescribed in Note 16 to the audited consolidated financial statements ofTravelCenters of America, Inc. as of and for the year endedDecember 31, 2006, which are included elsewhere in this Annual Report onForm 10-K.

**Executive Retention Plan**

Seventeen persons who previously worked for ourpredecessor are participating in our executive retention plan. The plancontemplates payments designed to encourage their continued employment by us.We will pay an aggregate of $2.6 million to the executives that are covered bythat plan and who remain in our employ as of December 31, 2007, and, asdescribed below, to Messrs. Doane and George pursuant to our revised employmentagreements with them.   We will also payan aggregate of $5.4 million to our executives who remain in our employ as ofJanuary 31, 2009 (the two year anniversary of the date of our spin off fromHospitality Trust).

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Our named executive officers are participating in theplan as follows:
|                 | ** ** | **Payment for  continued employment  through 12/31/07** | ** ** | **Payment for continued  employment through  the second anniversary  of the Hospitality Trust  acquisition** | ** ** |
|-----------------|------------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **      | ** ** | **$**                                                                  | ** ** | **$**                                                                                                                                                | ** ** |
|            | ** ** | ** **                                                             | ** ** | ** **                                                                                                                                           | ** ** |
| Mr. Doane (1)   |       | 350,000                                                                |       | —                                                                                                                                               |       |
| Mr. George (1)  |       | 225,000                                                                |       | —                                                                                                                                               |       |
| Mr. Hinderliter |       | 244,000                                                                |       | —                                                                                                                                               |       |
| Mr. Szima       |       | 162,500                                                                |       | 500,000                                                                                                                                              |       |
| Mr. Lee         |       | 150,000                                                                |       | 200,000                                                                                                                                              |       |

 

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(1) As described above in “—EmploymentContracts” Mr. Doane, our former President and Chief Executive Officer andMr. George, our former Executive Vice President, Chief Financial Officerand Secretary resigned as officers of ours on February 27, 2007.  As part of the compensation to be paid toMessrs. Doane and George under their revised employment agreements, we haveagreed to pay them the amounts shown above on December 31, 2007.

**OtherTransaction Benefits**

 Sixteen persons who previously worked for ourpredecessor owned shares of TravelCenters of America, Inc. and options toacquire such shares that were purchased by or awarded to them during theiremployment by our predecessor. As part of the Hospitality Trust acquisition,TravelCenters of America, Inc. shares and share options were redeemed forcash. Based upon the current estimate of the merger consideration payable inconnection with the Hospitality Trust acquisition, a portion of which was paidon the closing date of the merger but which is subject to adjustment based onthe actual net working capital amount as of the closing date (which amount isnot yet finalized), it is expected that all TravelCenters of America, Inc.shares and share options owned by former employees of our predecessor will bevalued in the aggregate at $135.6 million. TravelCenters of America, Inc.paid $5.5 million to certain of its employees who maintained theiremployment through the date of the closing of the Hospitality Trustacquisition. The amounts paid and expected to be paid to our named executiveofficers are as follows:
|                 | ** ** | **Payment for  owned shares** | ** ** | **Net cash settlement of  option awards** | ** ** | **Other cash  payments** | ** ** | **Total  transaction  benefits** | ** ** |
|-----------------|------------|-----------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------|------------|----------------------------------|------------|
| Mr. Doane       |       | $                                       | 2,225,011  |                                                          | $          | 14,807,330                    |       | $                                | 1,450,000  |   | $ | 18,482,341 |   |
| Mr. George      |       | 2,687,742                               |       | 13,570,148                                                    |       | 1,325,000                     |       | 17,582,890                       |       |
| Mr. Hinderliter |       | 2,761,614                               |       | 11,247,850                                                    |       | 244,000                       |       | 14,253,464                       |       |
| Mr. Szima       |       | 662,480                                 |       | 5,731,451                                                     |       | 162,500                       |       | 6,556,431                        |       |
| Mr. Lee         |       | 700,598                                 |       | 4,055,931                                                     |       | 350,000                       |       | 5,106,528                        |       |
|                 |            |                                         |            |                                                               |            |                               |            |                                  |            |  |  |  |  |

 

In addition, Mr. Kuhn, our predecessor’s chairman,received total transaction benefits of $28.9 million, including paymentfor owned shares of $4.9 million and net cash settlement of option awardsof $24.0 million.

In connection with their purchase of stock fromTravelCenters of America, Inc., certain executives were obligated on notespayable to TravelCenters of America, Inc. These notes and related accruedinterest were forgiven by TravelCenters of America, Inc. upon the closing ofthe Hospitality Trust acquisition. We do not anticipate that any notes or othercredit will be extended by us to any of our executives in the future. Thesenotes plus accrued interest for our named executive officers and Mr. Kuhnwere as follows just prior to being forgiven on January 31, 2007:

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|                 | ** ** | **Outstanding note balance,  including accrued interest** | ** ** |
|-----------------|------------|-------------------------------------------------------------------------------|------------|
|            |       |                                                                          |       |
| Mr. Kuhn        |       | $                                                                             | 145,170    |   |
| Mr. Doane       |       | 108,830                                                                       |       |
| Mr. George      |       | 108,887                                                                       |       |
| Mr. Hinderliter |       | 108,887                                                                       |       |
| Mr. Szima       |       | 66,803                                                                        |       |
| Mr. Lee         |       | 62,026                                                                        |       |
|                 |            |                                                                               |            |  |

 

The employment agreements between our predecessor andeach of Mr. Szima and Mr. Lee provide for automatic one year extensions subjectto notice of non-renewal.  As a result ofthe acquisition of TravelCenters of America, Inc., notice of non-renewal cannot result in expiration of the employment agreement sooner than theDecember 31 following the second anniversary of the change ofcontrol.  In the case of certain types ofseparations from the company, each employment agreement contains terms whichprovide for cash payments of two times the executive’s then current base salaryand target bonus.

**Our Equity Compensation Plan**

We have adopted the TravelCenters of America LLC 2007Equity Compensation Plan. Under this plan, we are authorized to grant ouremployees, officers, directors and other individuals rendering services to usand our subsidiaries equity based awards, including common shares, restrictedcommon shares, options to purchase our common shares and share appreciationrights. The plan will be administered by our compensation committee or by ourboard of directors, as may be determined by our board. The plan provides thatthe compensation committee or the board has the authority to select theparticipants and determine the terms of the awards granted under the plan. Theaggregate number of common shares which may be issued under the plan is2,000,000. No awards have been made to date under the plan and none areexpected to be made until after June 30, 2007. If you want moreinformation about this plan, you should review the copy of the plan, which hasbeen filed as an exhibit to this Annual Report on Form 10-K.

**Compensation Committee Interlocks andInsider Participation**

None of our compensation committee members is ouremployee, an employee of any of our subsidiaries or an employee of Reit Management.

Until January 11, 2007, Mr. Koumantzelis wasa trustee of Hospitality Trust, which is our landlord. Mr. Koumantzelisresigned his position as a trustee of Hospitality Trust on January 11,2007.

**Item 12.**  ***Security Ownership ofCertain Beneficial Owners and Management and Related Stockholder Matters***

*EquityCompensation Plan Information*.  We may grant common shares to our officersand other employees, subject to vesting requirements under our 2007 EquityCompensation Plan.  In addition, each ofour directors receives 1,500 shares per year as part of their annualcompensation for serving as our directors. The terms of grants made under the 2007 Equity Compensation Plan aredetermined by our board of directors or a committee thereof at the time of thegrant. The following table is as of December 31, 2006.

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| Plan Category                                          | ** ** | **Number of securities  to be issued upon  exercise of outstanding  options, warrants and  rights  (a)** | ** ** | **Weighted average  exercise price of  outstanding options,  warrants and rights  (b)** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in  column (a))  (c)** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                        |       |                                                                                                                                                  |       |                                                                                                                  |       |                                                                                                                                                                                                              |       |
| Equity compensation  plans approved by security holders     |       | —                                                                                                                                                |       | —                                                                                                                |       | 2,000,000                                                                                                                                                                                                         |       |
|                                                        |       |                                                                                                                                                  |       |                                                                                                                  |       |                                                                                                                                                                                                              |       |
| Equity compensation  plans not approved by security holders |       | —                                                                                                                                                |       | —                                                                                                                |       | —                                                                                                                                                                                                            |       |
|                                                        |       |                                                                                                                                                  |       |                                                                                                                  |       |                                                                                                                                                                                                              |       |
| Total                                                       |       | —                                                                                                                                                |       | —                                                                                                                |       | 2,000,000                                                                                                                                                                                                         |       |

 

**Security Ownership of CertainBeneficial Owners and Management**

The following table sets forth certain informationregarding beneficial ownership of our common shares as of March 15, 2007 by:

·                  each personknown to us, based upon SEC filings, to be the beneficial owner of more than 5%of our common shares;

·                  each namedexecutive officer;

·                  each of ourcurrent directors; and

·                  the directorsand executive officers named in “Management” as a group.

Unless otherwise noted, each beneficial owner has solevoting and investing power over the shares shown as beneficially owned exceptto the extent authority is shared by spouses under applicable law.
|                                                                  | ** ** | **Beneficial Ownership(1)** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|
| **Name and Address(2)**                                | ** ** | **Number of  Shares**       | ** ** | **Percent** | ** ** |
| ** **                                                       |       |                             |       |   |   |
| **Beneficial Owners of More Than  5% of Our Common Shares**      |       |                             |       |   |   |
| Scoggin Capital  Management, L.P. II(3)                          |       | 721,400.0                        |       | 8.2 | % |
|                                                             |       |                             |       |   |   |
| **Directors and Named Executive  Officers**                      |       |                             |       |   |   |
| Patrick F. Donelan                                               |       | —                           |       | * |   |
| Barbara D. Gilmore                                               |       | —                           |       | * |   |
| Michael H. Hinderliter                                           |       | —                           |       | * |   |
| John R. Hoadley                                                  |       | 260.0                            |       | * |   |
| Arthur G. Koumantzelis                                           |       | 561.4                            |       | * |   |
| Steven C. Lee                                                    |       | —                           |       | * |   |
| Thomas M. O’Brien                                           |       | 2,017.5                          |       | * |   |
| Barry M. Portnoy(4)                                              |       | 22,411.6                         |       | * |   |
| Joseph A. Szima                                                  |       | —                           |       | * |   |
| All directors and executive officers as a group (9 persons) |       | 25,250.5                         |       | * |   |

 

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*Less than 1%

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(1)                                  OurLLC agreement and other agreements to which we are a party place restrictionson the ability of any person or group to acquire beneficial ownership of morethan 9.8% of any class or series of our shares. The percentages indicated arebased upon the number of shares shown divided by the number of our commonshares outstanding as of March 15, 2007.

(2)                                  Unlessotherwise indicated, the address of each identified person or entity is: c/oTravelCenters of America LLC, 24601 Center Ridge Road, Westlake,Ohio 44145.

(3)                                  Thisinformation is as of March 15, 2007, and is based solely on a Schedule 13Gfiled with the SEC on February 12, 2007, by Scoggin Capital Management, L.P. IIand relating to beneficial and legal ownership of our shares. Based on theinformation provided in such Schedule 13G, the relevant members of thefiling group, together with their respective addresses are:  Scoggin Capital Management, L.P. II, andScoggin, LLC, each with an address of 660 Madison Avenue, New York, NY 10021,Scoggin International Fund, Ltd., c/o Financial Services (Bahamas) Ltd.; OneMontague Place, 4th Floor; East Bay Street; P.O. Box EE-17758; Nassau, Bahamasand Scoggin Worldwide Fund, Ltd. has a business address at c/o Q&HCorporate Services, Ltd.; 3rd Floor, Harbour Centre; P.O. Box 1348; GeorgeTown, Grand Cayman, Cayman Islands. Based solely upon the information in suchSchedule 13G, the named entities have sole voting power over 290,000shares, 356,400 shares, 315,000 shares and 41,400 shares, respectively, andsole dispositive power over 290,000, 356,400, 315,000 shares and 41,400 shares,respectively.

(4)                                  Includescommon shares owned by a corporation of which Mr. Portnoy is the solestockholder.

**Item 13.**  ***Certain Relationships andRelated Transactions, and Director Independence***

**CERTAINRELATIONSHIPS**

Our business operations are subject to possibleconflicts of interest. These conflicts may have caused, and in the future maycause, our business to be adversely affected. These conflicts and theirpossible adverse effects upon us include the following:

·               Two of the personswho serve as our directors were trustees of Hospitality Trust at the time wewere created, and one of them remains a managing trustee of Hospitality Trust.Most of our travel centers are leased from Hospitality Trust. We believe thatour lease terms with Hospitality Trust are commercially reasonable.Nonetheless, it is possible that, if the lease were negotiated on an arm’slength basis, the rent and other lease terms might be more favorable to us. Weare obligated to afford Hospitality Trust and other public companies managed byReit Management the opportunity to acquire or finance any real estateinvestments of the type in which they invest before we do. Also, our futurebusiness dealings with Hospitality Trust could be on terms less favorable to usthan would be possible if there were no historical or continuing relationshipbetween Hospitality Trust and us. Nonetheless, we believe that our continuing relationships withHospitality Trust will provide us with a competitive advantage in locatingbusiness expansion opportunities.

·               In addition to being active in ourmanagement activities, Messrs. Portnoy, O’Brien and Hoadley are alsoofficers and employees of Reit Management and of other companies managed byReit Management. Messrs. O’Brien and Hoadley devote a substantial majorityof their business time to our affairs; Mr. Portnoy may devote substantialtime to our business on a selected project basis. The remainder of theirbusiness time is devoted to the business of Reit Management and its affiliatesand managed companies. Compensation paid to Messrs. O’Brien and Hoadley inexchange for their services to us and as employees (consisting of

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base salary, bonus and awards under our 2007 Equity Compensation Plan)and to Messrs. O’Brien and Portnoy in exchange for their services to us as ourManaging Directors (consisting of share awards) are in addition to thecompensation Messrs. O’Brien, Hoadley and Portnoy receive from Reit Managementand its affiliates and managed companies. Because of these arrangements, we may have to compete with ReitManagement for the time and attention of Messrs. O’Brien, Hoadley and Portnoy.

·               Mr. Portnoy is an owner of ReitManagement. Reit Management is the manager for Hospitality Trust and has otherbusiness interests. We are party to a management and shared services agreementwith Reit Management under which Reit Management provides certain services tous. Under this management and shared services agreement, we pay Reit Managementa fee equal to 0.6% of the sum of our gross fuel margin and our total non-fuelrevenues. On a pro forma basis, this fee would have been $6.1 million forthe year ended December 31, 2006. We believe this fee arrangement will providereasonable compensation to Reit Management for the services to be provided tous. The management and shared services agreement is terminable by us or Reit Managementupon at least 90 days notice prior to the expiration date of the thencurrent term. Our management and shared services agreement was approved by ourindependent directors on January 12, 2007. However, despite our belief, the agreement’s approval by our independentdirectors and its termination provision, equivalent services might be availablefrom parties other than Reit Management on more favorable terms to us,including for a lesser fee. Also, the fact that Reit Management hasresponsibilities to other entities, including our landlord, Hospitality Trust,could create conflicts; and, in the event of such conflicts between HospitalityTrust and us, the management and shared services agreement allows ReitManagement to prefer its responsibilities to Hospitality Trust. See “Managementand Shared Services Agreement with Reit Management” below.

·               We are party to a lease agreement withHospitality Trust. Because our lease with Hospitality Trust was prepared byHospitality Trust and was not negotiated at arm’s length, the lease agreementmay provide more benefits to Hospitality Trust than to us.

**Board Decisions Regarding PossibleConflicts of Interest**

We have adoptedwritten governance guidelines which address, among other things, theconsideration and approval of any related person transaction between us andReit Management. Under these governance guidelines, we shall not enter into anytransaction in which any director or executive officer or any member of theimmediate family of any director or executive officer, has or will have adirect or indirect material interest unless that transaction has been disclosedor made known to our board of directors and the board authorizes, approves orratifies the transaction by the affirmative vote of a majority of thedisinterested directors, even if the disinterested directors constitute lessthan a quorum.  All related persontransactions described above, including those which predated the adoption ofour governance guidelines, were reviewed and approved by at least a majority ofour disinterested directors.

**Management and Shared ServicesAgreement with Reit Management**

We are party to a management and shared servicesagreement with Reit Management. The following is a summary of the materialprovisions of the management and shared services agreement between us and ReitManagement. If you want more information, you should read the entire agreement,which has been filed as an exhibit to this Annual Report on Form 10-K.

*Services.*   Reit Management oversees and assists us withvarious aspects of our business, which may include, but are not limited to,maintenance of our travel centers, site selection for properties on which newtravel centers may be developed, identification of, and purchase negotiationfor, travel centers and travel center companies, accounting and financialreporting, compliance with various laws and rules applicable to our status as apublicly owned company, capital markets and financing activities, investorrelations and general oversight of all our daily business activities, includinglegal matters, human resources, insurance programs, management informationsystems and the like.

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*Compensationto Reit Management.*  For these services, we pay Reit Management a fee equal to 0.6% of ourfuel gross margin and 0.6% of our total non-fuel revenues. The fee is payablemonthly based upon the prior month’s margin or revenues, as applicable. We alsoreimburse Reit Management for its reasonable out of pocket third party expensesand for our share, if any, of internal audit costs which are provided to us andother companies by Reit Management, as may be approved by our compensationcommittee.

*Subordination of Reit ManagementFees to Hospitality Trust Rent. * No fees will be paid to Reit Management if anyrent we owe Hospitality Trust is past due. Unpaid fees will accrue, togetherwith interest at the prime rate, and will be payable when the conditionpreventing their payment is no longer in effect or upon termination of, or theoccurrence of certain events of default by us under, the management and sharedservices agreement. The fees due Reit Management are not subordinated to any ofour other obligations.

*Conflicts of Interest withHospitality Trust. * We have acknowledged that Reit Management maycontinue to serve as the manager for Hospitality Trust and we have agreed that,regarding issues and in circumstances where there is a conflict of interestbetween us and Hospitality Trust, Reit Management will serve as the manager forHospitality Trust and will not be required to consider our interests.

*Non-Competition with ReitManagement. * We will afford any publicly owned companywhich Reit Management manages during the term of the management and sharedservices agreement the opportunity to acquire or finance any real estateinvestments of the types in which such entity invests before we do.

*Terminations.*   The initial term of the agreement expires onDecember 31, 2008, and it will renew automatically from year to yearunless either we or Reit Management provide written notice of termination atleast 90 days prior to the termination date.

*Indemnification,Default and Damages.*  We have agreed to indemnify Reit Management, its owners, directors,officers and employees for any damages, liabilities, losses or out of pocketexpenses incurred by them in the course of performing services other than anysuch damage, liability or loss resulting from Reit Management’s grossnegligence or bad faith. In the event of a termination because of our default,we must pay the fees due Reit Management for the remainder of the then currentterm. In the event of Reit Management’s default, our remedy is limited totermination of the agreement and we cannot collect damages unless ReitManagement is determined to have taken action willfully and in bad faith.

**LimitationUpon Share Ownership**

Our LLC Agreementprovides that no shareholder or group of shareholders acting in concert may ownmore than 9.8% of any class of our equity securities.  Our lease agreement with Hospitality Trustand our management and shared services agreement with Reit Management eachprovide that those agreements may be terminated by Hospitality Trust and ReitManagement, respectively, if any shareholder or group of shareholders acting inconcert acquires more than 9.8% of any class of our equity securities.  These provisions may help Hospitality Trustmaintain its tax status as a real estate investment trust but they also mayprevent a change in control of us and may prevent our shareholders fromrealizing takeover premiums for their shares. Also, any shareholders whoviolate this ownership limitation or cause us to lose the benefits of ourcontracts with Hospitality Trust or Reit Management may be liable to us andother shareholders for damages, including attorney’s fees.

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**Item 14.**  ***Principal Accountant Feesand Services***

Thefollowing table sets forth information concerning the fees billed to ourpredecessor for each of the last two fiscal years by our principal accountingfirm, PricewaterhouseCoopers LLP.
|                        | ** ** | **Year Ended December 31,** | ** ** |
|------------------------|------------|--------------------------------------------|------------|
| ** **             | ** ** | **2005**                                   | ** ** | **2006** | ** ** |
|                   | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Audit fees             |       | $                                          | 535,700    |   | $ | 528,000 |   |
| Audit related  fees(1) |       | $                                          | 87,000     |   | $ | 1,552,143 |   |
| Tax fees(2)            |       | $                                          | 8,957      |   | $ | 8,876 |   |
| Other fees             |       | $                                          | —     |   | $ | — |   |

 

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(1)          Auditrelated fees for 2005 primarily related to services provided with respect toresearch and consultations related to specific technical accounting mattersinvestigated at the request of our predecessor. Audit related fees for 2006 related to services provided in connection withthe filing of our registration statement, consultations regarding theaccounting for the Hospitality Trust lease and due diligence procedures as ourpredecessor marketed itself for sale. The aggregate amount of fees billed with respect to the registrationstatement and the lease accounting consultation of $1,540,143 was billed to andoriginally paid by our predecessor, but was the responsibility of HospitalityTrust pursuant to the merger agreement.

(2)          Taxfees for 2005 and 2006 were for services provided with respect to preparingCanadian tax returns.

Our audit committee hasestablished policies and procedures which are intended to control the servicesprovided by our independent registered public accounting firm and to monitortheir continuing independence.  Underthese policies, no services may be undertaken by our independent registeredpublic accounting firm unless the engagement is specifically approved by ouraudit committee or the services are included within a category which has beenpre-approved by our audit committee.  Themaximum charge for services is established by our audit committee when thespecific engagement or the category of services is approved orpre-approved.  In certain circumstances,our management is required to notify the audit committee when pre-approvedservices are undertaken and the committee or our chairman may approveamendments or modifications to the engagement or the maximum fees.  Our director of internal audit is responsibleto report to our audit committee regarding compliance with these policies andprocedures.

Our audit committee willnot approve engagements of our independent registered public accounting firm toperform non-audit services for us if doing so will cause our independentregistered public accounting firm to cease to be independent within the meaningof applicable SEC rules.  In othercircumstances, our audit committee considers, among other things, whether ourindependent registered public accounting firm is able to provide the requiredservices in a more or less effective and efficient manner than other availableservice providers and whether the services are consistent with the PublicCompany Accounting Oversight Board Rules.

As our audit committeewas not formed until January 2007 and the acquisition of our predecessor byHospitality Trust was not completed until January 31, 2007, our audit committeedid not approve the engagement of PricewaterhouseCoopers LLP to perform theservices summarized in the table above. The fees described in the table abovewere approved by our predecessor’s audit committee.  Our audit committee will approve any futureaudit or non-audit fees to be paid to our independent registered publicaccounting firm only after determining that providing these services will notcompromise its independence and that its familiarity with our record keepingand accounting systems will permit it to provide these services with equal orhigher quality, more quickly and at a lower cost than we could obtain theseservices form other providers.

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**PART IV**

**Item 15.**  ***Exhibits and Financial StatementSchedules***

(a)           Index to Financial Statements andFinancial Statement Schedules

The followingconsolidated financial statements and financial statement schedule ofTravelCenters of America LLC and its predecessor are included on the pagesindicated.
|                                                                                                                             | ** ** | **Page** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|----------|
| ** **                                                                                                                  |       |     |
| **TravelCenters  of America LLC Unaudited Pro Forma Financial Statements**                                                  |       |     |
| Introduction to Unaudited Pro Forma Financial  Statements                                                                   |       | F-2      |
| Unaudited Pro Forma Consolidated Balance Sheet as of  December 31, 2006                                                     |       | F-3      |
| Unaudited Pro Forma Consolidated Statement of  Operations for the year ended December 31, 2006                              |       | F-4      |
| Notes to Unaudited Pro Forma Consolidated Financial  Statements                                                             |       | F-5      |
|                                                                                                                        |       |     |
| **TravelCenters  of America LLC Audited Financial Statement**                                                               |       |     |
| Report of Independent Registered Public Accounting  Firm                                                                    |       | F-10     |
| Consolidated Balance Sheet as of December 31, 2006                                                                          |       | F-11     |
| Notes to Consolidated Balance Sheet                                                                                         |       | F-12     |
|                                                                                                                        |       |     |
| **TravelCenters  of America, Inc. (predecessor) Audited Financial Statements**                                              |       |     |
| Report of Independent Registered Public Accounting  Firm                                                                    |       | F-13     |
| Consolidated Balance Sheet at December 31, 2006 and  2005                                                                   |       | F-14     |
| Consolidated Statement of Operations and  Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and  2004 |       | F-15     |
| Consolidated Statement of Cash Flows for the Years  ended December 31, 2006, 2005 and 2004                                  |       | F-16     |
| Consolidated Statement of Nonredeemable  Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004     |       | F-17     |
| Notes to Consolidated Financial Statements                                                                                  |       | F-18     |
| Schedule II—Valuation and Qualifying Accounts for  the Years ended December 31, 2006, 2005 and 2004                    |       | S-1      |

 

All otherschedules are omitted because they are not applicable, not material or therequired information is shown in the financial statements listed above.

58

----

(b)           Exhibits
| Exhibit Number  | ** ** | **Description**                                                                                                                                                                                                                                                                                                                |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   2.1 |       | Agreement and Plan of Merger by and among  TravelCenters of America, Inc., Hospitality Trust, HPT TA Merger  Sub Inc. and Oak Hill Capital Partners (Incorporated by reference to Exhibit  2.1 of our Registration Statement on Form S-1, File No. 333-139272)                                                       |
| 2.2             |       | Amendment No. 1, dated as of January 30, 2007, to  the Agreement and Plan of Merger among TravelCenters of America, Inc.,  Hospitality Properties Trust, HPT TA Merger Sub Inc. and Oak Hill Capital  Partners, L.P. (Incorporated by reference to Exhibit 2.2 of our Current  Report on Form 8-K dated January 29, 2007) |
| 3.1             |       | Certificate of Formation of TravelCenters of America  LLC (Incorporated by reference to Exhibit 3.1 of our Registration Statement  on Form S-1, File No. 333-139272)                                                                                                                                                           |
| 3.2             |       | Amended and Restated Limited Liability Company  Operating Agreement of TravelCenters of America LLC (Filed herewith)                                                                                                                                                                                                           |
| 10.1            |       | Transaction Agreement by and among Hospitality  Properties Trust, HPT TA Properties Trust, HPT TA Properties LLC,  TravelCenters of America LLC and Reit Management & Research LLC  (Filed herewith)                                                                                                                  |
| 10.2            |       | Management and Shared Services Agreement between  TravelCenters of America LLC and Reit Management & Research LLC  (Filed herewith)                                                                                                                                                                              |
| 10.3            |       | Lease Agreement by and among HPT TA Properties Trust  and HPT TA Properties LLC, as Landlord, and TA Leasing LLC, as Tenant  (Filed herewith)                                                                                                                                                                             |
| 10.4            |       | Guaranty Agreement made by TravelCenters of America  LLC, TravelCenters of America Holding Company LLC and TA Operating LLC, as  Guarantors, for the benefit of the Landlord under the Lease Agreement (Filed  herewith)                                                                                                       |
| 10.5            |       | Freightliner Express Operating Agreement, dated as  of July 21, 1999, by and among Freightliner LLC, TA Operating  Corporation, and TA Franchise Systems Inc. (Incorporated by reference to  Exhibit 10.5 of our Registration Statement on Form S-1, File No. 333-139272)                                            |
| 10.6            |       | Amendment No. 1 to Freightliner Express Operating  Agreement, dated as of November 9, 2000, by and among  Freightliner LLC, TA Operating Corporation, and TA Franchise  Systems Inc. (Incorporated by reference to Exhibit 10.6 of our  Registration Statement on Form S-1, File No. 333-139272)                |
| 10.7            |       | Amendment No. 2 to Freightliner Express Operating  Agreement, dated as of April 15, 2003, by and among  Freightliner LLC, TA Operating Corporation, and TA Franchise  Systems Inc. (Incorporated by reference to Exhibit 10.7 of our  Registration Statement on Form S-1, File No. 333-139272)                  |
| 10.8            |       | Amendment No. 3 to Freightliner Express Operating  Agreement, dated as of July 26, 2006 by and among Freightliner LLC, TA  Operating Corporation, and TA Franchise Systems Inc. (Incorporated by  reference to Exhibit 10.8 of our Registration Statement on Form S-1, File No.  333-139272)                         |
| 10.9            |       | Employment Agreement, dated January 1, 2005, by and  between TravelCenters of America, Inc. and Joseph A. Szima  (Incorporated by reference to Exhibit 10.15 of the Our Registration Statement  on Form S-1, File No. 333-139272)                                                                                    |
| 10.10           |       | Employment Agreement, dated as of January 1, 2006,  by and between TravelCenters of America, Inc. and Steven C. Lee  (Incorporated by reference to Exhibit 10.16 of our Registration Statement on  Form S-1, File No. 333-139272)                                                                                    |
| 10.11           |       | 2007 Equity Compensation Plan of TravelCenters of  America LLC including form of Share Option Agreement (Incorporated by  reference to Exhibit 10.17 of Amendment No. 1 to our Registration Statement  on Form S-1/A, File No. 333-139272)                                                                                     |
| 10.12           |       | Employment Agreement, dated as of January 1, 2000,  by and between TravelCenters of America, Inc. and Timothy L. Doane  (Incorporated by reference to Exhibit 10.9 of our Registration Statement on  Form S-1, File No. 333-139272)                                                                                  |

 

59

----

 
| Exhibit Number | ** ** | **Description**                                                                                                                                                                                                                                                              |
|----------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13          |       | Amendment No. 1 to Employment Agreement, dated as of  May 26, 2000, by and between TravelCenters of America, Inc. and  Timothy L. Doane (Incorporated by reference to Exhibit 10.10 of our  Registration Statement on Form S-1, File No. 333-139272)          |
| 10.14          |       | Amendment No. 2 to Employment Agreement, dated as of  December 14, 2004, by and between TravelCenters of America, Inc.  and Timothy L. Doane (Incorporated by reference to Exhibit 10.11 of our  Registration Statement on Form S-1, File No. 333-139272)     |
| 10.15          |       | Amendment No. 3 to Employment Agreement, dated  as of March 30, 2006, by and between TravelCenters of  America, Inc., and Timothy L. Doane. (Incorporated by reference to  Exhibit 10.12 of our Registration Statement on Form S-1, File No. 333-139272) |
| 10.16          |       | Employment Agreement, dated as of January 1, 2000,  by and between TravelCenters of America, Inc. and James W. George  (Incorporated by reference to Exhibit 10.13 of our Registration Statement on  Form S-1, File No. 333-139272)                                |
| 10.17          |       | Amendment No. 1 to Employment Agreement, dated as of  May 26, 2000, by and between TravelCenters of America, Inc. and  James W. George (Incorporated by reference to Exhibit 10.14 of our  Registration Statement on Form S-1, File No. 333-139272)           |
| 10.18          |       | Summary of Director Compensation (Filed herewith)                                                                                                                                                                                                                            |
| 14.1           |       | TravelCenters of America LLC Code of Business  Conduct and Ethics (Incorporated by reference to Exhibit 14.1 of Amendment  No. 2 to our Registration Statement on Form S-1/A, File No. 333-139272)                                                                           |
| 21.1           |       | Subsidiaries of TravelCenters of America LLC  (Incorporated by reference to Exhibit 21.1 of Amendment No. 1 to our  Registration Statement on Form S-1/A, File No. 333-139272)                                                                                               |
| 31.1           |       | Rule 13a-14(a)/15d-14(a) Certification of Chief  Executive Officer (filed herewith)                                                                                                                                                                                          |
| 31.2           |       | Rule 13a-14(a)/15d-14(a) Certification of Chief  Financial Officer (filed herewith)                                                                                                                                                                                          |
| 32.1           |       | Section 1350 Certification of Chief Executive  Officer and Chief Financial Officer (furnished herewith)                                                                                                                                                                      |

 

60

----

**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.
|        | TRAVELCENTERS OF AMERICA LLC |
|--------|------------------------------|
|   |                         |   |
|   | March 20, 2007               |   | By: | /s/ | JOHN R. HOADLEY |   |
|   |                         | Name: | John R. Hoadley |
|   |                         | Title: | Executive Vice President,  Chief Financial Officer and Treasurer |
|        |                              |  |  |  |  |  |  |  |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities on the date indicated.
| Signature                   | ** ** | **Title**                                  | ** ** | **Date**       |
|-----------------------------|------------|--------------------------------------------|------------|----------------|
|                        |       |                                       |       |           |
| /s/ THOMAS M.  O’BRIEN |       | Managing Director, President and Chief     |       | March 20, 2007 |
| Thomas M. O’Brien      |       | Executive Officer                          |       |           |
|                        |       |                                       |       |           |
| /s/ JOHN R.  HOADLEY        |       | Executive Vice President, Chief Financial  |       | March 20, 2007 |
| John R. Hoadley             |       | Officer and Treasurer (Principal Financial |       |           |
|                        |       | Officer and Principal Accounting Officer)  |       |           |
|                        |       |                                       |       |           |
| /s/BARRY M.  PORTNOY        |       | Managing Director                          |       | March 20, 2007 |
| Barry M. Portnoy            |       |                                       |       |           |
|                        |       |                                       |       |           |
| /s/ PATRICK F.  DONELAN     |       | Director                                   |       | March 20, 2007 |
| Patrick F.  Donelan         |       |                                       |       |           |
|                        |       |                                       |       |           |
| /s/ BARBARA D.  GILMORE     |       | Director                                   |       | March 20, 2007 |
| Barbara D.  Gilmore         |       |                                       |       |           |
|                        |       |                                       |       |           |
| /s/ ARTHUR G.  KOUMANTZELIS |       | Director                                   |       | March 20, 2007 |
| Arthur G.  Koumantzelis     |       |                                       |       |           |

 

----

**INDEX TOFINANCIAL STATEMENTS AND SCHEDULES**
|                                                                                                                            | ** ** | **Page** |
|----------------------------------------------------------------------------------------------------------------------------|------------|----------|
| **TravelCenters of America LLC Unaudited Pro Forma  Financial Statements**                                                 |       |     |
| Introduction to Unaudited Pro Forma Financial  Statements                                                                  |       | F-2      |
| Unaudited  Pro Forma Consolidated Balance Sheet as of December 31, 2006                                                    |       | F-3      |
| Unaudited  Pro Forma Consolidated Statement of Operations for the year ended December  31, 2006                            |       | F-4      |
| Notes  to Unaudited Pro Forma Consolidated Financial Statements                                                            |       | F-5      |
|                                                                                                                       |       |     |
| **TravelCenters of America LLC Audited Financial  Statement**                                                              |       |     |
| Report of Independent Registered Public Accounting  Firm                                                                   |       | F-10     |
| Consolidated  Balance Sheet as of December 31, 2006                                                                        |       | F-11     |
| Notes to Consolidated Balance Sheet                                                                                        |       | F-12     |
|                                                                                                                       |       |     |
| **TravelCenters of America, Inc. (predecessor)  Audited Financial Statements**                                             |       |     |
| Report of Independent Registered Public Accounting Firm                                                                    |       | F-13     |
| Consolidated  Balance Sheet at December 31, 2006 and 2005                                                                  |       | F-14     |
| Consolidated Statement of Operations and Comprehensive  Income (Loss) for the Years ended December 31, 2006, 2005 and 2004 |       | F-15     |
| Consolidated Statement of Cash Flows for the Years  ended December 31, 2006, 2005 and 2004                                 |       | F-16     |
| Consolidated Statement of Nonredeemable Stockholders’  Equity for the Years Ended December 31, 2006, 2005 and 2004    |       | F-17     |
| Notes to Consolidated Financial Statements                                                                                 |       | F-18     |
| Schedule  II—Valuation and Qualifying Accounts for the Years ended December 31, 2006,  2005 and 2004                  |       | S-1      |

 

F-1

----

**TravelCentersof America LLC**

**Introductionto Unaudited Pro Forma Financial Statements**

The unaudited pro forma balance sheet at December 31,2006, presents the financial position of TravelCenters of America LLC as ifHospitality Trust’s acquisition of TravelCenters of America, Inc., therestructuring of that business and the spin off of TravelCenters ofAmerica LLC had been completed as of December 31, 2006, asdescribed in the notes thereto. The unaudited pro forma statement of operationsfor the year ended December 31, 2006, presents the results of operationsof TravelCenters of America LLC as if Hospitality Trust’s acquisition of TravelCentersof America, Inc., the restructuring of that business and the spin off ofTravelCenters of America LLC had been completed as of January 1, 2006, asdescribed in the notes thereto.

The allocation of the purchase price of HospitalityTrust’s acquisition of TravelCenters of America, Inc. and the assets andliabilities distributed in the spin off of TravelCenters of America LLC asreflected in these unaudited pro forma consolidated financial statements have,with the assistance of independent valuation specialists, been based uponpreliminary estimates of the fair value of assets acquired and liabilitiesassumed. A final determination of the fair value of the assets and liabilitiesdistributed in the spin off of TravelCenters of America LLC, will be based onthe actual net tangible and intangible assets of TravelCenters of America, Inc.that existed as of January 31, 2007, the date of the completion of thetransactions. Consequently, amounts preliminarily allocated to assets andliabilities could change significantly from those used in the pro formaunaudited consolidated financial statements. In the opinion of management, alladjustments necessary to reflect the effects of the transactions describedabove have been included in the pro forma financial statements.

These unaudited pro formafinancial statements do not represent our financial condition or results ofoperations for any future date or period. Actual future results may bematerially different from pro forma results. Differences could arise from manyfactors, including, but not limited to, those related to our operation as aseparate publicly owned company, competition in our business, our ability tosuccessfully attract or retain customers and employees, our ability to controloperating expenses, our capital structure and other changes. These unauditedpro forma financial statements should be read in conjunction with our and ourpredecessor’s audited financial statements and the related Management’sDiscussion and Analysis of our predecessor’s results of operations includedelsewhere in this annual report.

F-2

----

**TravelCentersof America LLC**

**UnauditedPro Forma Consolidated Balance Sheet at December 31, 2006**

**(dollarsin thousands)**
| ** **                                      | ** ** | **TravelCenters  of America  LLC  Historical** | ** ** | **TravelCenters  of America,  Inc.  Historical** | ** ** | **Merger,  Restructuring  and Spin Off  Adjustments** | ** ** | ** ** | ** ** | **Pro Forma** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------------------|------------|------------|------------|--------------------|------------|
| ** **                                      | ** ** | **A**                                               | ** ** | **B**                                                 | ** ** | ** **                                                      | ** ** | ** ** | ** ** | ** **         | ** ** |
| Current assets:                                 |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Cash and cash  equivalents                      |       | $                                                   | —     |                                                  | $          | 55,297                                                          |       | $          | 136,165    | ** **         | **C,D1**   |   | $ | 191,462 |   |
| Accounts  receivable, net                       |       | —                                              |       | 91,850                                                |       | —                                                          | ** ** | **D2**     |       | 91,850             |       |
| Inventories                                     |       | —                                              |       | 90,350                                                |       | 4,410                                                           | ** ** | **D3**     |       | 94,760             |       |
| Deferred income  taxes                          |       | —                                              |       | 14,806                                                |       | (14,806                                                         | )          | **E**      |       | —             |       |
| Other current  assets                           |       | —                                              |       | 14,651                                                |       | (698                                                            | )          | **D4**     |       | 13,953             |       |
| Total current assets                            |       | —                                              |       | 266,954                                               |       |                                                            |       |       |       | 392,025            |       |
| Property and equipment,  net                    |       | —                                              |       | 653,668                                               |       | (576,819                                                        | )          | **F**      |       | 207,734            |       |
|                                            |       |                                                | ** ** |                                                  |       | 25,633                                                          |       | **F,D5**   |       |               |       |
|                                            |       |                                                | ** ** |                                                  |       | 105,252                                                         |       | **G**      |       |               |       |
| Goodwill                                        |       | —                                              |       | 49,681                                                |       | (8,869                                                          | )          | **H,D6**   |       | 40,812             |       |
| Deferred financing  costs, net                  |       | —                                              |       | 15,462                                                |       | (15,462                                                         | )          | **I**      |       | —             |       |
| Deferred income taxes                           |       | —                                              |       | 438                                                   |       | (438                                                            | )          | **E**      |       | —             |       |
| Intangible assets, net                          |       | —                                              |       | 1,907                                                 |       | 21,872                                                          | ** ** | **D7**     |       | 23,779             |       |
| Other noncurrent assets                         |       | —                                              |       | 7,482                                                 |       | —                                                          | ** ** | **D8**     |       | 7,482              |       |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Total assets                                    |       | $                                                   | —     |                                                  | $          | 995,592                                                         |       |       |       |               |       | $ | 671,832 |   |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Current liabilities                             |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Current  maturities of long term debt           |       | $                                                   | —     |                                                  | $          | 7,019                                                           |       | $          | (7,019     | )                  | **I**      |   | $ | — |   |
| Accounts payable                                |       | —                                              |       | 121,198                                               |       | —                                                          | ** ** | **D9**     |       | 121,198            |       |
| Other accrued  liabilities                      |       | —                                              |       | 71,278                                                |       | (451                                                            | )          | **I,D10**  |       | 70,827             |       |
| Total current  liabilities                      |       | —                                              |       | 199,495                                               |       |                                                            |       |       | ** ** | 192,025            |       |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Commitments and  contingencies                  |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Long term debt, net of  unamortized discount    |       | —                                              |       | 668,734                                               |       | (668,734                                                        | )          | **I**      |       | —             |       |
| Capital lease  obligations                      |       | —                                              |       | —                                                |       | 105,252                                                         | ** ** | **G**      |       | 105,252            |       |
| Deferred income taxes                           |       | —                                              |       | 15,492                                                |       | (15,492                                                         | )          | **E**      |       | —             |       |
| Other noncurrent  liabilities                   |       | —                                              |       | 22,594                                                |       | (4,930                                                          | )          | **D11**    |       | 17,664             |       |
| Total liabilities                               |       | —                                              |       | 906,315                                               |       |                                                            |       |       |       | 314,941            |       |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Redeemable equity                               |       | —                                              |       | 13,403                                                |       | (13,403                                                         | )          | **J**      |       | —             |       |
| Total nonredeemable  shareholders’ equity  |       | —                                              |       | 75,874                                                |       | 136,165                                                         | ** ** | **C**      |       | 356,891            |       |
|                                            |       |                                                |       |                                                  | ** ** | 144,852                                                         | ** ** | **J**      |       |               |       |
|                                            |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Total liabilities and shareholders’ equity |       | $                                                   | —     |                                                  | $          | 995,592                                                         |       |       |       |               |       | $ | 671,832 |   |

 

F-3

----

**TravelCenters of America LLC**

**Unaudited Pro Forma Consolidated Statement of Operations**

**Forthe Year Ended December 31, 2006**

**(inthousands except per share data)**
| ** **                                                                                          | ** ** | **TravelCenters  of America  LLC  Historical** | ** ** | **TravelCenters  of America,  Inc.  Historical** | ** ** | **Merger,  Restructuring  and Spin Off  Adjustments** | ** ** | ** ** | ** ** | **Pro Forma** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------------------|------------|------------|------------|--------------------|------------|
| ** **                                                                                          | ** ** | **A**                                               | ** ** | **K**                                                 | ** ** | ** **                                                      | ** ** | ** ** | ** ** | ** **         | ** ** |
| Revenues                                                                                            |       | $                                                   | —     |                                                  | $          | 4,783,514                                                       |       | $          | —     |               |       |   | $ | 4,783,514 |   |
| Cost of goods sold  (excluding depreciation)                                                        |       | —                                              |       | 4,123,444                                             |       | —                                                          |       |       |       | 4,123,444          |       |
|                                                                                                |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Operating expenses:                                                                                 |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Site level  operating expenses                                                                      |       | —                                              |       | 415,868                                               |       | —                                                          |       |       |       | 415,868            |       |
| Selling, general  and administrative (including $8,921 of noncash share based compensation expense) |       | —                                              |       | 61,347                                                |       | 6,072                                                           | ** ** | **L**      |       | 67,419             |       |
| Real estate  lease rent                                                                             |       | —                                              |       | 11,011                                                |       | 159,409                                                         | ** ** | **M**      |       | 170,420            |       |
| Depreciation and  amortization                                                                      |       | —                                              |       | 71,856                                                |       | (53,827                                                         | )          | **N**      |       | 18,029             |       |
| Merger and refinancing  expenses                                                                    |       |                                                |       | 4,946                                                 |       | —                                                          | ** ** | **O**      |       | 4,946              |       |
| (Gain) loss on  asset sales                                                                         |       | —                                              |       | (500                                                  | )          | —                                                          |       |       |       | (500               | )          |
| Total operating  expenses                                                                           |       |                                                |       | 564,528                                               |       |                                                            |       |       |       | 676,182            |       |
| Income (loss) from  operations                                                                      |       |                                                |       | 95,542                                                |       |                                                            |       |       |       | (16,112            | )          |
|                                                                                                |       |                                                |       |                                                  |       |                                                            |       |       |       |               | ** ** |
| Other income (expense),  net                                                                        |       | —                                              |       | 1,250                                                 |       | —                                                          |       |       | ** ** | 1,250              |       |
| Interest and other  financial costs, net                                                            |       | —                                              |       | (47,482                                               | )          | 49,637                                                          | ** ** | **P**      |       | (9,155             | )          |
|                                                                                                |       |                                                |       |                                                  |       | (11,310                                                         | )          | **M**      |       |               | ** ** |
| Income (loss) before  taxes                                                                         |       | —                                              |       | 49,310                                                |       |                                                            |       |       |       | (24,017            | )          |
|                                                                                                |       |                                                |       |                                                  |       |                                                            |       |       |       |               | ** ** |
| Income taxes expense  (benefit)                                                                     |       | —                                              |       | 18,277                                                |       | (18,277                                                         | )          | **Q**      |       | —             |       |
| Net income (loss)                                                                                   |       | $                                                   | —     |                                                  | $          | 31,033                                                          |       |       |       |               |       | $ | (24,017 | ) |
|                                                                                                |       |                                                |       |                                                  |       |                                                            |       |       |       |               | ** ** |
| Weighted average shares  outstanding:                                                               |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Basic                                                                                               |       | —                                              |       | 6,937                                                 |       | 1,872                                                           | ** ** | **R**      |       | 8,809              | ** ** |
| Diluted                                                                                             |       |                                                |       | 7,579                                                 |       | 1,230                                                           | ** ** | **R**      |       | 8,809              | ** ** |
|                                                                                                |       |                                                |       |                                                  |       |                                                            |       |       |       |               |       |
| Basic net income (loss)  per common share                                                           |       | $                                                   | —     |                                                  | $          | 4.47                                                            |       |       |       |               |       | $ | (2.73 | ) |
| Diluted net income  (loss) per common share                                                         |       | $                                                   |       |                                                  | $          | 4.09                                                            |       |       |       |               |       | $ | (2.73 | ) |
|                                                                                                     |            |                                                     |            |                                                       |            |                                                                 |            |            |            |                    |            |  |  |  |  |

 

F-4

----

**TravelCenters of America LLC**

**Notes to Unaudited Pro Forma Consolidated FinancialStatements**

** **

**(amounts in thousands, except share and per shareamounts)**

 

**Pro Forma Balance Sheet Adjustments**

A.           Wewere formed by Hospitality Trust in October 2006 and capitalized with onedollar of cash. We have no other assets and no liabilities as of our formationdate. We and our subsidiaries were formed in connection with HospitalityTrust’s planned acquisition of TravelCenters of America, Inc., which isconsidered to be our predecessor under applicable SEC rules.

B.             Representsthe historical balance sheet of our predecessor.

C.             Representsthe cash that would have been contributed to us by Hospitality Trust as part ofour restructuring if the transaction had closed on December 31, 2006. Under theterms of the transaction agreement with Hospitality Trust, Hospitality Trustcontributed cash to us so that the sum of our cash and other net workingcapital on the distribution date was $200,000. Our cash balance as of January 31, 2007, was approximately $200,000 aportion of which was used as collateral for certain letters of credit or is atour site level operating cash accounts. We do not expect that the differencebetween the cash amount reflected in the pro forma financial statements and theactual amount of our cash on the distribution date to have a material impact onour expected operations.

D.            Asrequired under generally accepted accounting principles, our acquisition ofTravelCenters of America, Inc. will be treated as a business combination.Those principles require that we record the carrying value of the acquiredassets and liabilities at their fair market values, as follows:

 
| Calculation of purchase  price for TravelCenters of America, Inc.: |   |    |      |
|--------------------------------------------------------------------|--------|---------|-----------|
| Cash  consideration                                                |   | $       | 1,220,524 | (1) |
| Assumed  indebtedness extinguished at closing                      |   | 681,148 |      |
| Estimated fees  and other expenses                                 |   | 10,000  |      |
|                                                               |   | $       | 1,911,672 |   |

 

----

(1)    Cashconsideration per the merger agreement is equal to $1,925,000 less assumedindebtedness and adjusted for working capital, as defined, in excess of or lessthan $100,000 on the merger date.

F-5

----

** **
| Allocation of purchase  price to the fair value of assets and liabilities acquired:     |   |     |      |
|-----------------------------------------------------------------------------------------|--------|----------|-----------|
| Net assets and  liabilities transferred to Hospitality Trust in the restructuring       |   | $        | 1,690,946 |   |
| Assets and  liabilities retained by us in the restructuring:                            |   |     |      |
| Cash                                                                                    |   | 55,297   |      |
| Accounts  receivable                                                                    |   | 91,850   |      |
| Inventories                                                                             |   | 94,760   |      |
| Other current  assets                                                                   |   | 13,953   |      |
| Property and  equipment                                                                 |   | 102,482  |      |
| Identifiable  intangible assets                                                         |   | 23,779   |      |
| Other noncurrent  assets                                                                |   | 7,482    |      |
| Accounts payable                                                                        |   | (121,198 | )         |
| Other accrued  liabilities                                                              |   | (70,827  | )         |
| Other noncurrent  liabilities                                                           |   | (17,664  | )         |
| Excess of  purchase price over fair value of assets and liabilities acquired (goodwill) |   | 40,812   |      |
|                                                                                    |   |     |      |
|                                                                                    |   | $        | 1,911,672 |   |

 

Adjustments have been calculated as follows:
| ** **                      | ** ** | **Predecessor’s  historical carrying  amount** | ** ** | **Estimate of fair  market value  based upon  appraisal or  management  estimates** | ** ** | **Adjustment**                              | ** ** | **Ref.**   | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|------------|------------|
| ** **                      | ** ** | **Column I**                                        | ** ** | **Column II**                                                                                           | ** ** | **Column II less  Column I** | ** ** | ** ** | ** ** |
|                            | ** ** | ** **                                               | ** ** | ** **                                                                                                   | ** ** | ** **                                  |       |       |       |
| **Assets:**                     |       |                                                     |       |                                                                                                         |       |                                        |       |       |       |
| Cash                            |       | $                                                        | 55,297     |                                                                                                         | $          | 55,297                                      |       | $          | —     |   | D1 |   |
| Accounts  receivable            |       | 91,850                                                   |       | 91,850                                                                                                       |       | —                                      |       | D2         |       |
| Inventories                     |       | 90,350                                                   |       | 94,760                                                                                                       |       | 4,410                                       |       | D3         |       |
| Other current  assets           |       | 14,651                                                   |       | 13,953                                                                                                       |       | (698                                        | )          | D4         |       |
| Property and  equipment         |       | 76,849                                                   |       | 102,482                                                                                                      |       | 25,633                                      |       | D5         |       |
| Goodwill                        |       | 49,681                                                   |       | 40,812                                                                                                       |       | (8,869                                      | )          | D6         |       |
| Identifiable  intangible assets |       | 1,907                                                    |       | 23,779                                                                                                       |       | 21,872                                      |       | D7         |       |
| Other noncurrent  assets        |       | 7,482                                                    |       | 7,482                                                                                                        |       | —                                      |       | D8         |       |
| ** **                      |       |                                                     |       |                                                                                                         |       |                                        |       |       |       |
| **Liabilities:**                |       |                                                     |       |                                                                                                         |       |                                        |       |       |       |
| Accounts payable                |       | 121,198                                                  |       | 121,198                                                                                                      |       | —                                      |       | D9         |       |
| Other accrued  liabilities      |       | 71,278                                                   |       | 70,827                                                                                                       |       | 451                                         |       | D10        |       |
| Other noncurrent  liabilities   |       | 22,593                                                   |       | 17,663                                                                                                       |       | (4,930                                      | )          | D11        |       |
|                                 |            |                                                          |            |                                                                                                              |            |                                             |            |            |            |  |  |  |

 

E.              Thisadjustment represents the elimination of our predecessor’s historical carryingamount of deferred tax assets and liabilities. As of the date of the spin off,both our tax bases and book bases in our assets and liabilities wereredetermined with reference to fair market values, and we do not have basisdifferences that give rise to deferred tax assets or liabilities.

F-6

----

F.              Thisadjustment represents the elimination of our predecessor’s historical carryingamount of property, plant and equipment transferred to Hospitality Trust aspart of the restructuring. The adjustment was calculated as follows:

| Historical carrying amount  of our predecessor’s property and equipment, net                                                      |   | $        | 653,668 |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|
| Historical carrying  amount of our predecessor’s property and equipment, net, retained by  Hospitality Trust in the restructuring |   | (576,819 | )       |
| Historical carrying  amount of property and equipment, net, retained by us in the restructuring                                        |   | 76,849   |    |
| Estimated fair value of  property and equipment retained by us in the restructuring                                                    |   | 102,482  |    |
| Net adjustment                                                                                                                         |   | $        | 25,633  |   |

 

G.             Ourspin off from Hospitality Trust required us to evaluate our lease withHospitality Trust as a sale leaseback transaction under Statement of FinancialAccounting Standards No. 98, or SFAS 98, which addresses sale leasebacktransactions involving real estate. Under SFAS 98, we determined that severalof the travel centers owned by our predecessor that we now lease fromHospitality Trust did not qualify for operating lease treatment because morethan a minor portion of those travel centers are subleased to third parties. Wecarry such travel centers at an amount equal to Hospitality Trust’s recordedinitial carrying amount, equal to their fair value, and have an equal amount ofliability, representing our obligation to make future rent payments toHospitality Trust, which future payments will be recognized as interest expensein our statement of operations. See Note N.

H.            Thisadjustment represents elimination of our predecessor’s historical carryingamount of goodwill and recognition of goodwill for the excess of the purchaseprice over the fair value of assets and liabilities acquired in connection withHospitality Trust’s acquisition of our predecessor.

I.                 Thisadjustment represents the elimination of the debt, accrued interest and relatedunamortized deferred financing costs of our predecessor. In connection withHospitality Trust’s acquisition of TravelCenters of America, Inc., all of thedebt and accrued interest of our predecessor was paid.

J.                Thisadjustment represents the elimination of historical net shareholders’ equity ofour predecessor, plus the net effect of the pro forma adjustments describedabove.

F-7

----

 

**Pro Forma Statement of OperationsAdjustments**

K.            Representsthe historical operating results of our predecessor.

L.              Afterthe spin off from Hospitality Trust, we entered into a management and sharedservices agreement with Reit Management and Research LLC, or RMR, pursuant towhich we will receive certain management services.  The adjustment represents the fees payable toRMR.  No adjustment has been made to thehistorical selling, general and administrative expense of our predecessor,although some of those costs may be duplicative of services provided by RMR orbe otherwise non-recurring. For example, as required by applicableSEC rules, no adjustments have been made to the historical share compensationof our predecessor despite the fact that these amounts are attributableprincipally to the vesting of options for our predecessor’s shares that wereredeemed upon the closing of Hospitality Trust’s acquisition of TravelCentersof America, Inc.

M.         Ouragreement to lease real estate owned by Hospitality Trust requires us to makeminimum rent payments that have scheduled increases during the term of thelease.  The adjustments have beencalculated as follows:
|                                                       | ** ** | **Year Ended  December 31,  2006** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------|------------|
|                                                  | ** ** | ** **                                   | ** ** |
| Minimum base  rent (cash)                             |       | $                                            | 153,500    |   |
| Required  straight line rent adjustment               |       | 17,219                                       |       |
|                                                  |       |                                         |       |
| Total                                                 |       | 170,719                                      |       |
| Less amount  recognized as interest (see Note G) |       | (11,310                                      | )          |
|                                                  |       |                                         |       |
| Total adjustment                                      |       | $                                            | 159,409    |   |

 

F-8

----

N.            Aspart of the restructuring we retained a portion of the property and equipmentand personal property used in the operations of our travel centers. Inaddition, we retained certain identifiable intangible assets. This adjustmentrepresents the elimination of historical depreciation and amortization expenserecognized by our predecessor and the addition of depreciation and amortizationexpense related to the property, equipment and intangible assets retained by usat allocated valuations. The depreciation and amortization expense is based onthe estimated useful lives of the assets, which is up to 20 years for realestate and personal property and up to 16 years for intangible assets.
|                                                          | ** ** | **Year Ended  December 31,  2006** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------|------------|
|                                                     | ** ** | ** **                                   | ** ** |
| Elimination of  historical depreciation and amortization |       | $                                            | (71,856    | ) |
| Addition of  depreciation and amortization               |       | 18,029                                       |       |
| Net adjustment                                           |       | $                                            | (53,827    | ) |

 

O.            Thehistorical other income (expense), net, of our predecessor includes income of$1,250 related to claim settlements.  Inaddition, during the year ended December 31, 2006, our predecessor recognized$4,946 of expense related to costs it incurred in marketing itself for sale andpursuing various financing alternatives that will not be further pursued. Asrequired by applicable SEC rules, no adjustments have been made to eliminatethese expense items despite the fact that they are non-recurring.

P.              Allof our predecessor’s debt was paid at the time of Hospitality Trust’sacquisition of our predecessor. Pro forma interest income represents actualinterest income earned by our predecessor during the period shown. As requiredby applicable SEC rules, the pro forma financial statements do not giveeffect to interest income which would be earned on our pro forma cash balanceof $191,462 (see Note C) or related income taxes on such income.

Q.            Thisadjustment represents the elimination of our predecessor’s historical taxprovision.  As a result of theHospitality Trust acquisition and our spin off from Hospitality Trust, ourpredecessor’s tax attributes, such as net operating losses carried forward, ifany, will not be available to benefit us in the future.  Our predecessor’s blended federal and stateincome tax rate was approximately 37.5%.

R.             Thisadjustment represents the elimination of our predecessor’s shares outstandingand the addition of our 8,809 total common shares outstanding subsequent to thespin off.

 

F-9

----

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Shareholder and Board ofDirectors of TravelCenters of America LLC

In our opinion, the accompanying consolidated balancesheet presents fairly, in all material respects, the financial position ofTravelCenters of America LLC at December 31, 2006 in conformity with accountingprinciples generally accepted in the United States of America. This financialstatement is the responsibility of the Company’s management. Our responsibilityis to express an opinion on this financial statement based on our audit. Weconducted our audit of this statement in accordance with the standards of thePublic Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the balance sheet is free of material misstatement. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the balance sheet, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall balancesheet presentation. We believe that our audit of the balance sheet provides areasonable basis for our opinion.
| /s/ PricewaterhouseCoopers LLP |   |
|--------------------------------|--------|
|                           |
| Cleveland, Ohio                |
| March 19, 2007                 |

 

F-10

----

**TravelCentersof America LLC**

**ConsolidatedBalance Sheet**
| ** **                                                                    | ** ** | **December 31, 2006** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------|------------|
|                                                                          |       |                            |       |
| Cash                                                                          |       | $                               | 1          |   |
|                                                                          |       |                            |       |
| Total assets                                                                  |       | $                               | 1          |   |
|                                                                          |       |                            |       |
| Total liabilities                                                             |       | $                               | —     |   |
|                                                                          |       |                            |       |
| Shareholder’s  equity—common shares, 1 share issued and outstanding |       | 1                               |       |
|                                                                          |       |                            |       |
| Total liabilities and  shareholder’s equity                              |       | $                               | 1          |   |

 

The accompanying notesare an integral part of this consolidated financial statement.

F-11

----

**TravelCentersof America LLC**

**Notesto Consolidated Balance Sheet**

**December31, 2006**

**1.    Organization**

TravelCenters of America LLC was formed as a Delawarelimited liability company on October 10, 2006. TravelCenters of AmericaLLC was a wholly owned, indirect subsidiary of Hospitality Properties Trust, orHPT, and TravelCenters of America LLC’s initial capitalization of $1 wasprovided by HPT on TravelCenters of America LLC’s formation date. From thattime until January 31, 2007, TravelCenters of America LLC conducted no businessactivities.

**2.    Acquisitionof TravelCenters of America, Inc.**

In September 2006 HPT agreed to acquire 100% ofTravel Centers of America, Inc. This acquisition was effected through amerger of a subsidiary of ours with and into TravelCenters ofAmerica, Inc. on January 31, 2007. When the acquisition was consummated,we and HPT restructured the business of TravelCenters of America, Inc. andHPT distributed our shares to its shareholders in a spin off transactioneffective January 31, 2007.

The principaleffects of the restructuring were that (i) TravelCenters of America, Inc.became our 100% owned subsidiary, (ii) subsidiaries of HPT that we do not ownbecame owners of the real estate at substantially all of the travel centersowned by TravelCenters of America, Inc. as of December 31, 2006 as well as itstrademarks, (iii) we entered into a lease of that real estate and thosetrademarks, and (iv) all of the outstanding indebtedness of TravelCenters ofAmerica, Inc. was repaid in full. We retained the balance of the tangible andintangible assets previously owned by TravelCenters of America, Inc. and willcontinue their operations.

F-12

----

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Stockholdersof TravelCenters of America, Inc.:

        In ouropinion, the accompanying consolidated balance sheet and related consolidatedstatement of operations and comprehensive income (loss), consolidated statementof cash flows and consolidated statement of nonredeemable stockholders’ equitypresent fairly, in all material respects, the financial position ofTravelCenters of America, Inc. and its subsidiaries at December 31,2006 and December 31, 2005, and the results of their operations and their cashflows for each of the three years in the period ended December 31, 2006 inconformity with accounting principles generally accepted in the United Statesof America. In addition, in our opinion, the financial statement schedulelisted in the accompanying index presents fairly, in all material respects, theinformation set forth therein when read in conjunction with the relatedconsolidated financial statements. These financial statements and financialstatement schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements andfinancial statement schedule based on our audits. We conducted our audits ofthese statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

        Asdiscussed in Note 3 to the consolidated financial statements, the Companychanged the manner in which it accounts for share based employee compensationeffective January 1, 2006.
| /s/ PricewaterhouseCoopers LLP |   |
|--------------------------------|--------|
|                           |
| Cleveland, Ohio                |
| March 19, 2007                 |

 

F-13

----

**TravelCentersof America, Inc.**

**ConsolidatedBalance Sheet**
| ** **                                                                                                                                                                                                            | ** ** | **December 31,**                        | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                                                                                            | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                                                                            | ** ** | **(In Thousands of Dollars)** | ** ** |
| **Assets**                                                                                                                                                                                                            | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Current assets:                                                                                                                                                                                                       |       |                                         |       |   |   |
| Cash and cash  equivalents                                                                                                                                                                                            |       | $                                            | 47,547     |   | $ | 55,297 |   |
| Accounts  receivable (less allowance for doubtful accounts of $1,715 for 2005 and $1,344  for 2006)                                                                                                                   |       | 75,075                                       |       | 91,850 |   |
| Inventories                                                                                                                                                                                                           |       | 87,702                                       |       | 90,350 |   |
| Deferred income  taxes                                                                                                                                                                                                |       | 9,623                                        |       | 14,806 |   |
| Other current  assets                                                                                                                                                                                                 |       | 10,454                                       |       | 14,651 |   |
| Total current assets                                                                                                                                                                                                  |       | 230,401                                      |       | 266,954 |   |
|                                                                                                                                                                                                                  |       |                                         |       |   |   |
| Property and equipment,  net                                                                                                                                                                                          |       | 629,253                                      |       | 653,668 |   |
| Goodwill                                                                                                                                                                                                              |       | 49,681                                       |       | 49,681 |   |
| Deferred financing  costs, net                                                                                                                                                                                        |       | 18,605                                       |       | 15,462 |   |
| Deferred income taxes                                                                                                                                                                                                 |       | 207                                          |       | 438 |   |
| Intangible assets, net                                                                                                                                                                                                |       | 1,967                                        |       | 1,907 |   |
| Other noncurrent assets                                                                                                                                                                                               |       | 9,590                                        |       | 7,482 |   |
|                                                                                                                                                                                                                  |       |                                         |       |   |   |
| Total assets                                                                                                                                                                                                          |       | $                                            | 939,704    |   | $ | 995,592 |   |
| ** **                                                                                                                                                                                                            |       |                                         |       |   |   |
| **Liabilities and Stockholders’  Equity**                                                                                                                                                                        |       |                                         |       |   |   |
| Current liabilities:                                                                                                                                                                                                  |       |                                         |       |   |   |
| Current  maturities of long-term debt                                                                                                                                                                                 |       | $                                            | 7,009      |   | $ | 7,019 |   |
| Accounts payable                                                                                                                                                                                                      |       | 117,271                                      |       | 121,198 |   |
| Other accrued  liabilities                                                                                                                                                                                            |       | 69,482                                       |       | 71,278 |   |
| Total current  liabilities                                                                                                                                                                                            |       | 193,762                                      |       | 199,495 |   |
| Commitments and  contingencies                                                                                                                                                                                        |       | —                                       |       | — |   |
| Long-term debt (net of  unamortized discount)                                                                                                                                                                         |       | 675,638                                      |       | 668,734 |   |
| Deferred income taxes                                                                                                                                                                                                 |       | 1,226                                        |       | 15,492 |   |
| Other noncurrent  liabilities                                                                                                                                                                                         |       | 21,771                                       |       | 22,594 |   |
|                                                                                                                                                                                                                  |       | 892,397                                      |       | 906,315 |   |
| Redeemable equity                                                                                                                                                                                                     |       | 1,935                                        |       | 13,403 |   |
|                                                                                                                                                                                                                  |       |                                         |       |   |   |
| Nonredeemable  stockholders’ equity (Note 16):                                                                                                                                                              |       |                                         |       |   |   |
| Common stock and  other nonredeemable stockholders’ equity (Common stock—6,937,003 shares  outstanding at December 31, 2005 and 2006; Preferred stock— 5,000,000  shares authorized but unissued) |       | 226,482                                      |       | 225,951 |   |
| Accumulated  deficit                                                                                                                                                                                                  |       | (181,110                                     | )          | (150,077 | ) |
| Total nonredeemable  stockholders’ equity                                                                                                                                                                        |       | 45,372                                       |       | 75,874 |   |
|                                                                                                                                                                                                                  |       |                                         |       |   |   |
| Total liabilities, redeemable equity and nonredeemable stockholders’  equity                                                                                                                                     |       | $                                            | 939,704    |   | $ | 995,592 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-14

----

**TravelCenters of America, Inc.Consolidated Statement of Operations and Comprehensive Income (Loss)**
| ** **                                                                                                                                                           | ** ** | **Year Ended December 31,**   | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                                           | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                           | ** ** | **(In Thousands of Dollars)** | ** ** |
| Revenues:                                                                                                                                                            |       |                                         |       |   |   |   |   |
| Fuel                                                                                                                                                                 |       | $                                            | 1,959,239  |   | $ | 3,231,853 |   | $ | 3,905,128 |   |
| Non-fuel                                                                                                                                                             |       | 707,958                                      |       | 833,500 |   | 868,380 |   |
| Rent and  royalties                                                                                                                                                  |       | 10,667                                       |       | 9,943 |   | 10,006 |   |
| Total revenues                                                                                                                                                       |       | 2,677,864                                    |       | 4,075,296 |   | 4,783,514 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Cost of goods sold  (excluding depreciation):                                                                                                                        |       |                                         |       |   |   |   |   |
| Fuel                                                                                                                                                                 |       | 1,857,160                                    |       | 3,102,513 |   | 3,761,571 |   |
| Non-fuel                                                                                                                                                             |       | 289,867                                      |       | 348,267 |   | 361,873 |   |
| Total cost of goods  sold (excluding depreciation)                                                                                                                   |       | 2,147,027                                    |       | 3,450,780 |   | 4,123,444 |   |
| Operating expenses:                                                                                                                                                  |       |                                         |       |   |   |   |   |
| Site level  operating expenses                                                                                                                                       |       | 346,301                                      |       | 409,483 |   | 415,868 |   |
| Selling, general  and administrative expenses (including $65, $8,921 and $11,930 of noncash  share based compensation expense for 2004, 2005 and 2006, respectively) |       | 43,180                                       |       | 53,051 |   | 61,347 |   |
| Real estate  lease rent                                                                                                                                              |       | 15,868                                       |       | 10,884 |   | 11,011 |   |
| Depreciation and  amortization expense                                                                                                                               |       | 58,750                                       |       | 64,981 |   | 71,856 |   |
| Merger and  refinancing expenses                                                                                                                                     |       | —                                       |       | — |   | 4,946 |   |
| Gain on asset  sales                                                                                                                                                 |       | (2,547                                       | )          | (207 | ) | (500 | ) |
| Total operating  expenses                                                                                                                                            |       | 461,552                                      |       | 538,192 |   | 564,528 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Income from operations                                                                                                                                               |       | 69,285                                       |       | 86,324 |   | 95,542 |   |
| Other income (expense),  net                                                                                                                                         |       | 110                                          |       | (37,592 | ) | 1,250 |   |
| Interest and other  financial costs, net                                                                                                                             |       | (46,061                                      | )          | (48,518 | ) | (47,482 | ) |
| Income before income  taxes                                                                                                                                          |       | 23,334                                       |       | 214 |   | 49,310 |   |
| Provision for income  taxes                                                                                                                                          |       | 8,472                                        |       | 2,309 |   | 18,277 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Net income (loss)                                                                                                                                                    |       | 14,862                                       |       | (2,095 | ) | 31,033 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Other comprehensive  income (loss), net of tax (Note 7):                                                                                                        |       |                                         |       |   |   |   |   |
| Unrealized gain  on derivative instruments                                                                                                                           |       | —                                       |       | 674 |   | (674 | ) |
| Foreign currency  translation adjustments                                                                                                                            |       | 318                                          |       | 270 |   | (9 | ) |
| Comprehensive income  (loss)                                                                                                                                         |       | $                                            | 15,180     |   | $ | (1,151 | ) | $ | 30,350 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Basic earnings (loss)  per common share                                                                                                                              |       | $                                            | 2.14       |   | $ | (0.30 | ) | $ | 4.47 |   |
|                                                                                                                                                                 |       |                                         |       |   |   |   |   |
| Diluted earnings (loss) per common share                                                                                                                             |       | $                                            | 2.04       |   | $ | (0.30 | ) | $ | 4.09 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-15

----

**TravelCentersof America, Inc.Consolidated Statement of Cash Flows**
| ** **                                                                                | ** ** | **Year Ended December 31,**   | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                                | ** ** | **(In Thousands of Dollars)** | ** ** |
| **Cash flows from operating  activities:**                                                |       |                                         |       |   |   |   |   |
| Net income (loss)                                                                         |       | $                                            | 14,862     |   | $ | (2,095 | ) | $ | 31,033 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities: |       |                                         |       |   |   |   |   |
| Stock  compensation expense                                                               |       | 65                                           |       | 8,921 |   | 11,930 |   |
| Tender premium  and debt discount paid                                                    |       | —                                       |       | (32,610 | ) | — |   |
| Depreciation and  amortization                                                            |       | 58,750                                       |       | 64,981 |   | 71,856 |   |
| Amortization of  deferred financing costs                                                 |       | 3,882                                        |       | 3,908 |   | 3,143 |   |
| Financing costs  expensed upon extinguishment of debt                                     |       | 1,699                                        |       | 39,566 |   | — |   |
| Deferred income  tax provision                                                            |       | 5,974                                        |       | 1,235 |   | 9,248 |   |
| Provision for  doubtful accounts                                                          |       | 307                                          |       | 975 |   | 40 |   |
| Gain on asset  sales                                                                      |       | (4,162                                       | )          | (2,181 | ) | (500 | ) |
| Changes in  assets and liabilities, adjusted for the effects of business acquisitions:    |       |                                         |       |   |   |   |   |
| Accounts  receivable                                                                      |       | (19,235                                      | )          | (14,836 | ) | (17,524 | ) |
| Inventories                                                                               |       | (6,321                                       | )          | (11,237 | ) | (2,648 | ) |
| Other current  assets                                                                     |       | (1,255                                       | )          | (1,078 | ) | (2,795 | ) |
| Accounts payable  and other accrued liabilities                                           |       | 40,439                                       |       | 27,073 |   | 7,374 |   |
| Other, net                                                                                |       | 2,141                                        |       | (1,640 | ) | (3,671 | ) |
| Net cash provided by  operating activities                                                |       | 97,146                                       |       | 80,982 |   | 107,486 |   |
|                                                                                      |       |                                         |       |   |   |   |   |
| **Cash flows from investing  activities:**                                                |       |                                         |       |   |   |   |   |
| Business  acquisitions                                                                    |       | (126,117                                     | )          | (1,180 | ) | — |   |
| Proceeds from  asset sales                                                                |       | 13,816                                       |       | 2,785 |   | 2,652 |   |
| Capital  expenditures                                                                     |       | (122,919                                     | )          | (85,403 | ) | (92,810 | ) |
| Net cash used in  investing activities                                                    |       | (235,220                                     | )          | (83,798 | ) | (90,158 | ) |
|                                                                                      |       |                                         |       |   |   |   |   |
| **Cash flows from financing  activities:**                                                |       |                                         |       |   |   |   |   |
| Increase  (decrease) in checks drawn in excess of bank balances                           |       | 2,934                                        |       | 7,190 |   | (2,564 | ) |
| Revolving loan  borrowings (repayments), net                                              |       | 11,400                                       |       | (25,000 | ) | — |   |
| Long-term debt  repayments                                                                |       | (310,401                                     | )          | (650,110 | ) | (7,009 | ) |
| Long-term debt  borrowings                                                                |       | 475,000                                      |       | 680,000 |   | — |   |
| Debt issuance  costs                                                                      |       | (9,857                                       | )          | (5,039 | ) | — |   |
| Debt  extinguishment and refinancing costs paid                                           |       | —                                       |       | (2,603 | ) | — |   |
| Other, net                                                                                |       | (158                                         | )          | 38 |   | — |   |
| Net cash provided by  (used in) financing activities                                      |       | 168,918                                      |       | 4,476 |   | (9,573 | ) |
|                                                                                      |       |                                         |       |   |   |   |   |
| Effect of exchange rate  changes on cash                                                  |       | (3                                           | )          | 41 |   | (5 | ) |
| Net increase in cash                                                                      |       | 30,841                                       |       | 1,701 |   | 7,750 |   |
|                                                                                      |       |                                         |       |   |   |   |   |
| Cash and cash  equivalents at the beginning of the year                                   |       | 15,005                                       |       | 45,846 |   | 47,547 |   |
| Cash and cash equivalents at the end of the year                                          |       | $                                            | 45,846     |   | $ | 47,547 |   | $ | 55,297 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-16

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**TravelCentersof America, Inc.Consolidated Statement of Nonredeemable Stockholders’ Equity**
| ** **                                                            | ** ** | **Year Ended December 31,**   | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                            | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                            | ** ** | **(In Thousands of Dollars)** | ** ** |
| **Common stock and other  nonredeemable stockholders equity:**        |       |                                         |       |   |   |   |   |
| ** **                                                            |       |                                         |       |   |   |   |   |
| **Common  Stock:**                                                    |       |                                         |       |   |   |   |   |
| Balance at  beginning and end of year                                 |       | $                                            | 3          |   | $ | 3 |   | $ | 3 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| **Additional  paid-in capital:**                                      |       |                                         |       |   |   |   |   |
| Balance at  beginning of year                                         |       | 216,112                                      |       | 215,743 |   | 224,413 |   |
| Accretion of  redeemable equity                                       |       | (369                                         | )          | — |   | — |   |
| Stock options                                                         |       | —                                       |       | 8,670 |   | 152 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| Balance at end  of year                                               |       | 215,743                                      |       | 224,413 |   | 224,565 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| Total common stock and  other nonredeemable stockholders’ equity |       | 216,868                                      |       | 226,482 |   | 225,951 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| **Accumulated  other comprehensive income:**                          |       |                                         |       |   |   |   |   |
| Balance at  beginning of year                                         |       | 804                                          |       | 1,122 |   | 2,066 |   |
| Change in fair  value of interest rate swap agreement, net of tax     |       | —                                       |       | 674 |   | (674 | ) |
| Foreign currency  translation adjustments, net of tax                 |       | 318                                          |       | 270 |   | (9 | ) |
|                                                                  |       |                                         |       |   |   |   |   |
| Balance at end  of year                                               |       | 1,122                                        |       | 2,066 |   | 1,383 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| **Accumulated deficit:**                                              |       |                                         |       |   |   |   |   |
|                                                                  |       |                                         |       |   |   |   |   |
| Balance at  beginning of year                                         |       | (193,877                                     | )          | (179,015 | ) | (181,110 | ) |
| Net income  (loss)                                                    |       | 14,862                                       |       | (2,095 | ) | 31,033 |   |
|                                                                  |       |                                         |       |   |   |   |   |
| Balance at end  of year                                               |       | (179,015                                     | )          | (181,110 | ) | (150,077 | ) |
|                                                                  |       |                                         |       |   |   |   |   |
| Total nonredeemable stockholders’ equity                         |       | $                                            | 37,853     |   | $ | 45,372 |   | $ | 75,874 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-17

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**TravelCentersof America, Inc.Notes to Consolidated Financial Statements**

**YearsEnded December 31, 2004, 2005 and 2006**

**1.    BusinessDescription and Summary of Operating Structure**

TravelCenters of America, Inc. (“we” or “theCompany”) is a holding company which, through our wholly owned subsidiaries,owns, operates and franchises travel centers along the North American highwaysystem to serve long-haul trucking fleets and their drivers, independent truckdrivers and general motorists. At December 31, 2006, our geographicallydiverse nationwide network of full-service travel centers consisted of 163sites located in 40 states and the province of Ontario, Canada. Our operationsare conducted through three distinct types of travel centers:

·      those operated by us, which we refer to ascompany operated sites;

·      those owned by us and leased toindependent lessee franchisees, which we refer to as franchisee operated sites;and

·      those owned and operated by independentfranchisees, which we refer to as franchisee owned and operated sites.

At December 31, 2006, our network consisted of140 company operated sites, ten franchisee operated sites and 13 franchiseeowned and operated sites. During 2006, we acquired one new company operatedsite and added one franchisee owned and operated site to our network. Weoperate as one reportable segment. We aggregate our travel centers into onereportable segment because they have similar economic and operating characteristics.With only one of our 163 travel centers located in Canada, the amounts ofrevenues and long-lived assets located in Canada are not material.

Our travel centers are located at key points along theU.S. interstate highway system and in Canada, typically on 20- to 25-acresites. Operating under the “TravelCenters of America” and “TA” brand names, ournationwide network provides our customers with diesel fuel and gasoline as wellas non-fuel products and services such as truck repair and maintenance services,full-service restaurants, quick service restaurants, travel and conveniencestores and other driver amenities. We also collect rents and franchiseroyalties from the franchisees who operate the franchisee operated sites andfranchisee owned and operated sites and, as a franchisor, assist ourfranchisees in providing service to long haul trucking fleets and theirdrivers, independent truck drivers and general motorists.

The consolidated financial statements include theaccounts of TravelCenters of America, Inc. and its wholly ownedsubsidiaries, TA Operating Corporation and TA Franchise Systems Inc., aswell as TA Licensing, Inc., TA Travel, L.L.C., 3073000 Nova ScotiaCompany, TravelCentres Canada Inc., and TravelCentres Canada LimitedPartnership, which are all direct or indirect wholly owned subsidiaries ofTA Operating Corporation. Intercompany accounts and transactions have beeneliminated.

## *Merger Transaction with Hospitality Properties Trust*

OnSeptember 15, 2006, we and stockholders owning a majority of our voting stockentered into an agreement and plan of merger with Hospitality Properties Trust(“HPT”), pursuant to which HPT, through a subsidiary, agreed to acquire 100% ofour outstanding common stock for approximately $1.9 billion and merge HPT’ssubsidiary with and into us. The merger, which we refer to as the HPTTransaction, occurred on January 31, 2007. Upon the closing, our business wasrestructured. The principal effects of the restructuring were that (i) webecame a 100% subsidiary of TravelCenters of America LLC, a subsidiary of HPT,(ii) subsidiaries of HPT that we do not own became owners of the real estate atsubstantially all of the travel centers we owned as of December 31, 2006 aswell as our trademarks, (iii) we entered into a lease of that real estate andthose trademarks, and (iv) all of our outstanding indebtedness was repaid infull. We retained the balance of our tangible and intangible assets and willcontinue our operations. After the restructuring, HPT, a publicly owned real estateinvestment trust, spun off the shares of TravelCenters of America LLC to itscommon shareholders and TravelCenters of America LLC, which is our parent afterthe acquisition and restructuring, became a publicly owned company effectiveJanuary 31, 2007.

F-18

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**2.    Summary ofSignificant Accounting Policies**

*Use of Estimates*

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

*Revenue Recognition*

Sales revenues and related costs are recognized at thetime of delivery of motor fuel to customers at either the terminal or thecustomer’s facility for wholesale fuel sales and at the time of final sale toconsumers at our company operated travel centers for retail fuel and non-fuelsales. The estimated cost to us of the redemption by customers of our loyaltyprogram points is recorded as a discount against gross sales in determining thenet sales amount presented in our consolidated statement of operations andcomprehensive income (loss).

For those travel centers that we own but lease to afranchisee, rent revenue is recognized based on the rent payment due for eachperiod. These leases specify rent increases each year based on inflation ratesfor the respective periods or capital improvements we make at the travelcenter. As the rent increases related to these factors are contingent uponfuture events, the related rent revenue is not recognized until it becomesaccruable.

Franchise royalty revenues are collected andrecognized monthly and are determined as a percentage of the franchisees’revenues. Initial franchise fee revenues are recognized at the point when thefranchisee opens for business under our brand name, which is when we havefulfilled all of our initial obligations under the related agreements. Initialfranchise fees were $100,000 in each of the years ended December 31, 2004and 2005 and $200,000 during the year ended December 31, 2006.

*Earnings Per Share*

Basic earnings per common share is calculated bydividing net income (and income from continuing operations, cumulative effectof a change in accounting, extraordinary items and/or discontinued operations,if applicable) by the weighted average number of common shares outstanding duringthe year. Diluted earnings per common share is calculated by adjusting weightedaverage outstanding shares, assuming conversion of all potentially dilutivestock options and warrants, using the treasury stock method. See Note 6for further discussion.

*Cash and Cash Equivalents*

For purposes of the statement of cash flows, weconsider all highly liquid investments with an initial maturity of three monthsor less to be cash.

*Accounts Receivable and Allowancefor Doubtful Accounts*

Trade accounts receivable are recorded at the invoicedamount and do not bear interest. The allowance for doubtful accounts is ourbest estimate of the amount of probable losses in our existing accountsreceivable. We determine the allowance based on customer risk assessment and historicalwrite-off experience. We review our allowance for doubtful accounts monthly.Past due balances over specific amounts and in excess of specified amounts arereviewed individually for collectibility. All other balances are reviewed on apooled basis by type of receivable. Account balances are charged off againstthe allowance when we feel it is probable the receivable will not be recovered.We do not have any off balance sheet credit exposure related to our customers.

F-19

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*Inventories*

        Inventoriesare stated at the lower of cost or market value, cost being determinedprincipally on the weighted average cost method.

*Property and Equipment*

        Propertyand equipment are stated at cost. Depreciation is computed on a straight-linebasis over the following estimated useful lives of the assets:
| Buildings and site  improvements     |   | 15-20 years |   |
|--------------------------------------|--------|-------------|--------|
| Pumps and underground  storage tanks |   | 5-20 years  |   |
| Machinery and equipment              |   | 3-15 years  |   |
| Furniture and fixtures               |   | 5-10 years  |   |

 

Repair and maintenance costs are charged to expense asincurred, while major renewals and betterments are capitalized. Included in theamounts capitalized is an allocation of certain internal payroll and otheroverhead costs associated with the direct oversight of the capital investmentand development program and the projects included therein. These costs areamortized over twelve years, the estimated composite life of our property andequipment. The cost and related accumulated depreciation of property andequipment sold, replaced or otherwise disposed of are removed from theaccounts. Any resulting gains or losses are recognized in operations. SeeNote 9.

*Intangible Assets*

Acquired intangible assets, other than goodwill, areinitially recognized based on their fair value. Those intangible assetsacquired in a business combination are initially recognized in accordance withStatement of Financial Accounting Standards (FAS) No. 141, “BusinessCombinations.” FAS 141 requires an allocation of purchase price to allassets and liabilities acquired, including those intangible assets that arisefrom contractual or other legal rights or are otherwise capable of beingseparated or divided from the acquired entity (but excluding goodwill), basedon the relative fair values of the acquired assets and liabilities. Any excessof acquisition cost over the fair value of the acquired net assets is recordedas goodwill. Costs of internally developing, maintaining, or restoringintangible assets that are not specifically identifiable, that haveindeterminate lives or that are inherent in a continuing business and relatedto the entity as a whole are expensed as incurred. Intangible assets withfinite lives are amortized on a straight-line basis over their estimated lives,principally the terms of the related contractual agreements giving rise tothem. Goodwill and intangible assets with indefinite lives are not amortizedbut are reviewed on January 1 of each year (or more frequently ifimpairment indicators arise) for impairment (see Note 10).

*Internal Use Software Costs*

During the application development stage of aninternal-use computer software project, we capitalize (i) the externaldirect costs of materials and services consumed in developing or obtaining theinternal-use computer software, (ii) to the extent of time spent directlyon the project, payroll costs of employees directly associated with and whodevote time to the project, and (iii) related interest costs incurred.Internal and external costs incurred in the preliminary project stage andpost-implementation stage, such as for exploring alternative technologies,vendor selection and maintenance, are expensed as incurred, as are all trainingcosts. The costs of significant upgrades and enhancements that result inadditional functionality are accounted for in the same manner as similar costsfor new software projects. The costs of all other upgrades and enhancements areexpensed as incurred.

F-20

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*Impairment of Long Lived Assets*

Impairment charges are recognized when the carryingvalue of a long lived asset group to be held and used in the business is notrecoverable and exceeds its fair value, and when the carrying value of along-lived asset to be disposed of exceeds the estimated fair value of theasset less the estimated cost to sell the asset. Such impairment charges arerecognized in the period during which the circumstances surrounding an asset tobe held and used have changed such that the carrying value is no longerrecoverable, or during which a commitment to a plan to dispose of the asset ismade. Such tests are performed at the individual travel center level. Inaddition, intangible assets are subjected to further evaluation and impairmentcharges are recognized when events and circumstances indicate the carryingvalue of the intangible asset exceeds the fair market value of the asset.Impairment charges, when required, are included in depreciation andamortization expense in our consolidated statement of operations andcomprehensive income (loss).

*Deferred Financing Costs*

Deferred financing costs were incurred in conjunctionwith issuing long term debt and are amortized into interest expense over thelives of the related debt instruments using the effective interest method (seeNote 13).

*Classification of Costs and Expenses*

Cost of goods sold (excluding depreciation) representsthe costs of fuels and other products sold, including freight. Site leveloperating expenses principally represent costs incurred in operating our travelcenters, consisting primarily of labor, maintenance, supplies and utilities.

*Operating Lease Expense*

Rental on most operating leases is charged to expenseover the lease term as it becomes payable. Certain operating leases specifyscheduled rent increases over the lease term. The effects of those scheduled rentincreases, which are included in minimum lease payments, are recognized in rentexpense over the lease term on a straight-line basis.

*Share Based Employee Compensation*

Until January 1,2006, we accounted for our stock based employee compensation plans under therecognition and measurement principles of Accounting Principles Board OpinionNo. 25, “Accounting for Stock Issued to Employees,” and relatedinterpretations. Effective January 1, 2006, we adopted FAS 123 (Revised), “Share-BasedPayment” (FAS 123R).  See Note 3 forfurther discussion of this change in accounting principle.   Options were granted to certain members ofour management in 2001. There have been no grants of options since thattime. For granted options that vested over time, no compensation expense wasrecognized, as all of those options had an exercise price equal to or greaterthan the market value of the underlying common stock at the date of grant. Forgranted options that vest based on attaining certain measures of performance,compensation expense is recognized when it becomes probable that theperformance triggers for such options will be achieved.   See Note 16 for further discussion of ourshare based compensation plans and related amounts recognized, as well as atable that illustrates the effect on net income (loss) if we had applied thefair value recognition provisions of FAS 123R to all share based paymenttransactions. Share based compensation expense is included in selling, generaland administrative expenses in our consolidated statement of operations andcomprehensive income (loss).

F-21

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*Environmental Remediation*

We provide for remediation costs and penalties whenthe responsibility to remediate is probable and the amount of associated costsis reasonably determinable. Remediation expenses are included within operatingexpenses in our consolidated statement of operations and comprehensive income(loss). Generally, the timing of remediation accruals coincides with completionof a feasibility study or the commitment to a formal plan of action. Ifrecoveries of remediation costs from third parties are probable, a receivableis recorded. Accruals are not recorded for the costs of remediation activitiesundertaken on our behalf by certain subsidiaries of The British Petroleum Companyp.l.c. (“BP”), at BP’s sole expense (see Note 20) for existing matters atthe time we acquired certain travel centers from BP. In our consolidatedbalance sheet, the accrual for environmental matters is included in othernoncurrent liabilities, with the amount estimated to be expended within thesubsequent year reported as a current liability within the other accruedliabilities balance.

*Defined Contribution Plan*

We sponsor a 401(k) defined contribution plan toprovide eligible employees with additional income upon retirement. Ourcontributions to the plans are based on employee contributions and compensationand are recognized in operating expenses in the period incurred.

*Asset Retirement Obligations*

We recognize the future costs to remove ourunderground storage tanks, and to remove leasehold improvements as required atexpiration of the respective leases, over the estimated useful lives of eachtank, or leasehold improvement, in accordance with the provisions ofFAS 143, “Accounting for Asset Retirement Obligations.” A liability forthe fair value of an asset retirement obligation with a corresponding increaseto the carrying value of the related long-lived asset is recorded at the timean underground storage tank or leasehold improvement is installed. We amortizethe amount added to property and equipment and recognize accretion expense inconnection with the discounted liability over the remaining life of therespective underground storage tank or leasehold improvement. The estimatedliability is based on historical experiences in removing these assets,estimated useful lives, external estimates as to the cost to remove the assetsin the future and regulatory and/or contractual requirements. The liability isa discounted liability using a credit-adjusted risk-free rate. Revisions to theliability could occur due to changes in removal costs, asset useful lives or ifnew regulations regarding the removal of such tanks are enacted and/oramendments to the lease contracts are negotiated. See Note 9.

*Income Taxes*

Deferred income tax assets and liabilities areestablished to reflect the future tax consequences of differences between thetax bases and financial statement bases of assets and liabilities. Themeasurement of deferred tax assets is reduced, if necessary, by a valuationallowance when it is no longer more likely than not the deferred tax asset willbe realized.

*Concentration of Credit Risk*

We grant credit to our customers and may requireletters of credit or other collateral. Allowances for doubtful accounts andnotes receivable are maintained based on historical payment patterns, aging ofaccounts receivable, periodic review of our customers’ financial condition, andactual write-off history.

F-22

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*Derivative Instruments*

We recognize derivatives as either assets orliabilities on the balance sheet and measure those instruments at fair value.The accounting for changes in the fair value of a derivative depends on theintended use of the derivative and the resulting designation. We designate ourderivatives based upon criteria established by FAS 133, “Accounting forDerivative Instruments and Hedging Activities.” For a derivative designated asa fair value hedge, the change in fair value is recognized in earnings in theperiod of change together with the offsetting loss or gain on the hedged itemattributed to the risk being hedged. For a derivative designated as a cash flowhedge, the effective portion of the derivative’s gain or loss is initiallyreported as a component of accumulated other comprehensive income (loss) andsubsequently reclassified into earnings when the hedged exposure affectsearnings. The ineffective portion of the gain or loss is reported in earningsimmediately. We have used derivatives to manage risk arising from changes ininterest rates. Our objectives for holding derivatives are to decrease thevolatility of earnings and cash flows associated with changes in interestrates. See Note 21.

*Fair Value of Financial Instruments*

The following methods and assumptions were used toestimate the fair value of each class of financial instruments for whichestimation is practicable: the fair values of financial instruments classifiedas current assets or liabilities approximate the carrying values due to theshort-term maturity of the instruments. The fair value of our fixed-rate indebtedness that was not publiclytraded was estimated based on the current borrowing rates available to us forfinancings with similar terms and maturities (see Note 13); and the fairvalues of our interest rate protection agreements are based on bank-quotedmarket prices.

*Reclassifications*

Certain reclassifications of 2004 and 2005 data havebeen made within the operating expenses section of the statement of operationsand comprehensive income (loss) to conform to the current year presentation.

**3.    Change inAccounting Principle**

Effective January 1, 2006, we adoptedFAS 123R, which replaced FAS No. 123, “Accounting for Stock-basedCompensation,” and superseded Accounting Principles Board Opinion No. 25, “Accountingfor Stock Issued to Employees” (APB 25). FAS 123R requirescompensation cost relating to share based payment transactions be recognized inthe financial statements. We adopted FAS 123R using the prospectiveapproach; accordingly, prior periods were not restated. There was no effect onour balance sheet or results of operations as a result of the adoption ofFAS 123R. Prior to January 1, 2006, we measured compensation costsrelated to share based payments under APB 25, as permitted byFAS 123, and provided pro forma disclosure in the notes to financialstatements as required by FAS 123 and FAS 148.

Under APB 25, we accounted for share basedcompensation using the intrinsic value method of accounting. For options thatvested based on the passage of time, no share based compensation expense wasreflected in our consolidated statements of operations because for all suchoptions the exercise price equaled the estimated market value of the underlyingshare on the date of grant. For options that vested based on attaining specifiedfinancial return performance targets, no share based compensation cost wasreflected in our consolidated statements of operations until such time asattaining of the targets was determined to be probable, which was not the casefor the options granted under the 2001 stock plan until the fourth quarter of2005. We have not granted options since the adoption of FAS 123R, but inApril 2006 we modified certain of our outstanding options and,accordingly, we began accounting for these modified options as prescribed byFAS 123R. As a result, we have recognized share based compensation expensewith respect to these modified options in the financial statements for the yearended December 31, 2006. See Note 16 for additional discussion of ourshare based compensation.

F-23

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**4.****              Recently IssuedAccounting Pronouncements**

*FIN 48.    *InJune 2006 the FASB issued Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (FIN 48). FIN 48 is effective for fiscal yearsbeginning after December 15, 2006. FIN 48 prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.Under this guidance, a benefit can be recognized with respect to a tax positiononly if it is more likely than not that the position will be sustained uponexamination. In such cases, the tax position is to be measured at the largestamount of benefit that is greater than 50% likely of being realized uponultimate settlement. We are in the process of evaluating what, if any, effectadoption of FIN 48 will have on our financial statements, but do not expect that the effect will be material to ourfinancial position, results of operations or cash flows when we adopt iteffective January 1, 2007.

*SAB 108.    *InSeptember 2006, the Securities and Exchange Commission issued Staff AccountingBulletin No. 108, “Considering the Effects of Prior Year Misstatements whenQuantifying Misstatements in Current Year Financial Statements” (SAB 108).  SAB 108 requires a “dual approach” forquantifications of errors using both a method that focuses on the incomestatement impact, including the cumulative effect of prior years’misstatements, and a method  that focuseson the period end balance sheet.  SAB 108was effective for us December 31, 2006. There was no material impact on our financial statements as a result ofadopting SAB 108.

*FAS 157.*    In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157).FAS 157 is effective for fiscal years beginning after November 15,2007. FAS 157 defines fair value, establishes a framework for measuringfair value in accordance with generally accepted accounting principles, andexpands disclosures about fair value measurements, but does not require any newfair value measurements. We are in the process of evaluating what, if any,effect adoption of FAS 157 will have on our financial statements when weadopt it effective January 1, 2008.

*FAS 159.    *InFebruary 2007, the FASB issued Statement of Financial Accounting StandardsNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities” (FAS 159).  FAS 159 iseffective for fiscal years beginning after November 15, 2007.  FAS 159 permits companies to measure manyfinancial instruments and certain other assets and liabilities at fair value onan instrument by instrument basis.  FAS159 also establishes presentation and disclosure requirements to facilitate comparisonsbetween companies that select different measurement attributes for similartypes of assets and liabilities.  We arein the process of evaluating what, if any, effect adoption of FAS 159 willhave on our financial statements when FAS 159 is adopted effectiveJanuary 1, 2008.

**5.****              Acquisition**

On December 1, 2004, we acquired from Rip GriffinTruck Service Center, Inc. the assets related to eleven travel centerslocated in seven states, primarily in the southwestern region of the UnitedStates. The acquisition was completed to strengthen our presence in thesouthwestern United States and included the land, buildings, equipment,inventories and certain prepaid assets at the eleven travel centers. Theresults from these eleven travel centers were included in our consolidatedfinancial statements from December 1, 2004. The aggregate purchase pricewas $129,142,000, all of which was paid in cash or assumed liabilities. Theacquisition was funded with borrowings under our 2004 Credit Agreement as partof the 2004 Refinancing (see Note 13). We expect that all of the goodwillresulting from this acquisition will be tax deductible. The following tablesummarizes the amounts assigned to the assets acquired and the liabilitiesassumed at the date of acquisition.

F-24

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| ** **               | ** ** | **As of  December 1, 2004** | ** ** |
|--------------------------|------------|--------------------------------------------|------------|
| ** **               | ** ** | **(In Thousands  of Dollars)**   | ** ** |
|                     |       |                                       |       |
| Current assets           |       | $                                          | 5,799      |   |
| Property and  equipment  |       | 99,360                                     |       |
| Goodwill                 |       | 22,993                                     |       |
| Intangible  assets       |       | 500                                        |       |
| Other noncurrent  assets |       | 490                                        |       |
| Total assets acquired    |       | 129,142                                    |       |
|                     |       |                                       |       |
| Current  liabilities     |       | 995                                        |       |
| Noncurrent  liabilities  |       | 1,515                                      |       |
|                     |       |                                       |       |
| Net assets acquired      |       | $                                          | 126,632    |   |

 

The following unaudited pro forma information presentsour results of operations as if the acquisition of the Rip Griffin travelcenters had taken place on January 1, 2004.
| ** **                                              | ** ** | **Year Ended  December 31, 2004** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                              | ** ** | **(In Thousands  of Dollars)**         | ** ** |
|                                                    |       |                                             |       |
| Total revenue                                           |       | $                                                | 2,879,984  |   |
| Gross profit                                            |       | $                                                | 577,851    |   |
| Income before  extraordinary item and accounting change |       | $                                                | 18,086     |   |
| Net income                                              |       | $                                                | 18,086     |   |

These pro forma results of operations have beenprepared for comparative purposes only and do not purport to be indicative ofthe results of operations that actually would have resulted had the acquisitionoccurred on January 1, 2004, or that may result in the future.

During the years ended December 31, 2004 and2005, we paid aggregate amounts of $636,000 and $1,180,000, respectively, toconvert two franchisee operated sites to company operated sites during each ofthose years.

**6.****              Earnings Per Share**

The following represents a reconciliation from basicearnings per common share to diluted earnings per common share. The assumedexercise of stock options and warrants would have had an anti-dilutive effecton earnings per share for 2005.

F-25

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| ** **                                                                         | ** ** | **Year Ended December 31,**                         | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2004**                                                           | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                         | ** ** | **(In Thousands, except per share data)** | ** ** |
|                                                                               | ** ** | ** **                                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Determination of  shares:                                                          |       |                                                               |       |   |   |   |   |
| Weighted average common shares outstanding                                         |       | 6,937                                                              |       | 6,937 |   | 6,937 |   |
| Incremental shares attributable to the assumed  exercise of dilutive stock options |       | 62                                                                 |       | — |   | 365 |   |
| Incremental shares attributable to the assumed  exercise of warrants               |       | 277                                                                |       | — |   | 277 |   |
|                                                                               |       |                                                               |       |   |   |   |   |
| Diluted weighted  average common shares outstanding                                |       | 7,276                                                              |       | 6,937 |   | 7,579 |   |
|                                                                               |       |                                                               |       |   |   |   |   |
| Basic earnings  per common share                                                   |       | $                                                                  | 2.14       |   | $ | (0.30 | ) | $ | 4.47 |   |
| Diluted earnings per  common share                                                 |       | $                                                                  | 2.04       |   | $ | (0.30 | ) | $ | 4.09 |   |

**7.****              Comprehensive Income**

Income tax provision related to other comprehensiveincome consisted of the following:
| ** **                                           | ** ** | **Year Ended December 31,**                         | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                           | ** ** | **2004**                                                           | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                           | ** ** | **(In Thousands, except per share data)** | ** ** |
|                                                 |       |                                                               |       |   |   |   |   |
| Related to gain  (loss) on derivative instruments    |       | $                                                                  | —     |   | $ | 347 |   | $ | (347 | ) |
| Related to  foreign currency translation adjustments |       | 83                                                                 |       | 89 |   | (2 | ) |
|                                                 |       |                                                               |       |   |   |   |   |
| Total                                                |       | $                                                                  | 83         |   | $ | 436 |   | $ | (349 | ) |

 

**8.****              Inventories**

Inventories consisted of the following:
| ** **            | ** ** | **2005**                                     | ** ** | **2006**   | ** ** |
|-----------------------|------------|----------------------------------------------|------------|------------|------------|
| ** **            | ** ** | **(In Thousands of Dollars)** | ** ** |
|                  | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Non-fuel  merchandise |       | $                                            | 72,341     |       | $          | 71,821 |   |
| Petroleum  products   |       | 15,361                                       |       | 18,529     |       |
|                  |       |                                         |       |       |       |
| Total  inventories    |       | $                                            | 87,702     |       | $          | 90,350 |   |

 

F-26

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**9.****              Property andEquipment**

Property and equipment consisted of the following:
| ** **                          | ** ** | **December 31,**                        | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                          | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                |       |                                         | ** ** | ** ** | ** ** |
| Land                                |       | $                                            | 83,596     | ** ** | $ | 82,523 |   |
| Buildings and  improvements         |       | 606,482                                      |       | 648,228 |   |
| Machinery,  equipment and furniture |       | 330,513                                      |       | 357,083 |   |
| Construction in  progress           |       | 50,804                                       |       | 44,879 |   |
|                                |       |                                         |       |   |   |
|                                |       | 1,071,395                                    |       | 1,132,713 |   |
| Less:  accumulated depreciation     |       | 442,142                                      |       | 479,045 |   |
|                                |       |                                         |       |   |   |
| Property and  equipment, net        |       | $                                            | 629,253    |   | $ | 653,668 |   |

 

Total depreciation expense for the years endedDecember 31, 2004, 2005, and 2006 was $58,561,000, $64,655,000 and$71,991,000, respectively. We have capitalized certain internal costsassociated with our capital investment and development program. For the yearsended December 31, 2004, 2005 and 2006 the amounts capitalized were$2,531,000, $3,110,000 and $1,598,000 respectively. The unamortized balance ofsuch costs as of December 31, 2006 was $16,519,000.

We are obligated to remove our underground storagetanks and to remove certain assets at some sites we lease.  A reconciliation of our asset retirementobligation liability, which is included within other noncurrent liabilities inour consolidated balance sheet, for the years ended December 31, 2004,2005 and 2006 was as follows:
| ** **              | ** ** | **Year Ended December 31,**   | ** ** |
|-------------------------|------------|----------------------------------------------|------------|
| ** **              | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **              | ** ** | **(In Thousands of Dollars)** | ** ** |
|                    |       |                                         |       |   |   |   |   |
| Balance at  January 1,  |       | $                                            | 663        |   | $ | 760 |   | $ | 845 |   |
| Liabilities incurred    |       | 33                                           |       | — |   | 2 |   |
| Liabilities settled     |       | (19                                          | )          | (10 | ) | (9 | ) |
| Accretion expense       |       | 83                                           |       | 95 |   | 153 |   |
| Revisions to estimates  |       | —                                       |       | — |   | 352 |   |
|                    |       |                                         |       |   |   |   |   |
| Balance at December 31, |       | $                                            | 760        |   | $ | 845 |   | $ | 1,343 |   |

F-27

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**10.****       Goodwill and IntangibleAssets**

*Goodwill.*    Goodwill results from our business acquisitions andrepresents the excess of amounts paid to the sellers over the fair values ofthe tangible assets acquired. For the years ended December 31, 2004 and2005, we recorded goodwill of $23,314,000 and $783,000, respectively, inconnection with converting franchisee operated sites to company operated sitesand, in 2004, the Rip Griffin acquisition (see Note 5). The changes in thecarrying amount of goodwill for the years ended December 31, 2004, 2005and 2006 were as follows:
| ** **                           | ** ** | **Year Ended December 31,**   | ** ** |
|--------------------------------------|------------|----------------------------------------------|------------|
| ** **                           | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                           | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                 |       |                                         |       |   |   |   |   |
| Balance as of  beginning of period   |       | $                                            | 25,584     |   | $ | 48,898 |   | $ | 49,681 |   |
| Goodwill  recorded during the period |       | 23,314                                       |       | 783 |   | — |   |
|                                 |       |                                         |       |   |   |   |   |
| Balance as of end of  period         |       | $                                            | 48,898     |   | $ | 49,681 |   | $ | 49,681 |   |

 

*Intangible Assets.*    Leasehold interest represents the value, obtainedthrough acquisition, of favorable lease provisions at one location, the leasefor which extended 111⁄2 years from the date of the acquisition. The leaseholdinterest was being amortized over the 111⁄2 year period, which ended during 2005.Trademarks relate primarily to our purchase of the trademarks, service marks,trade names and commercial symbols used in our business. The trademarks haveindefinite lives and, therefore, are not amortized. Other intangible assetsprimarily includes noncompetition agreements that are amortized over theircontractual lives.

Intangible assets, net, consisted of the following:
| ** **                                          | ** ** | **December 31,**                        | ** ** |
|-----------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                          | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                                          | ** ** | **(In Thousands of Dollars)** | ** ** |
| Amortizable  intangible assets:                     | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Leasehold interest                                  |       | $                                            | 1,724      |   | $ | 1,724 |   |
| Other                                               |       | 1,396                                        |       | 1,396 |   |
|                                                |       |                                         |       |   |   |
| Total amortizable intangible assets                 |       | 3,120                                        |       | 3,120 |   |
| Less—accumulated amortization                  |       | 2,551                                        |       | 2,611 |   |
|                                                |       |                                         |       |   |   |
| Net carrying value of amortizable intangible assets |       | 569                                          |       | 509 |   |
|                                                |       |                                         |       |   |   |
| Carrying value  of trademarks                       |       | 1,398                                        |       | 1,398 |   |
|                                                |       |                                         |       |   |   |
| Intangible  assets, net                             |       | $                                            | 1,967      |   | $ | 1,907 |   |

 

Total amortization expense for our amortizableintangible assets for the years ended December 31, 2004, 2005 and 2006 was$189,000, $130,000 and $60,000, respectively. The estimated aggregate amortizationexpense for our amortizable intangible assets for each of the five succeedingfiscal years is $60,000 for each year.

F-28

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**11.****       Other accrued liabilities**

                        Otheraccrued liabilities consisted of the following:
| ** **                              | ** ** | **December 31,**                        | ** ** |
|-----------------------------------------|------------|----------------------------------------------|------------|
| ** **                              | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                              | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                    |       |                                         | ** ** | ** ** | ** ** |
| Taxes payable,  other than income taxes |       | $                                            | 26,082     | ** ** | $ | 26,747 |   |
| Accrued wages  and benefits             |       | 17,778                                       |       | 16,734 |   |
| Interest payable                        |       | 1,904                                        |       | 1,001 |   |
| Other accrued  liabilities              |       | 23,718                                       |       | 26,796 |   |
|                                    |       |                                         |       |   |   |
| Total other  accrued liabilities        |       | $                                            | 69,482     |   | $ | 71,278 |   |

 

**12.****       Revolving Loan**

Until January 31, 2007, we had available to us arevolving credit facility of $150,000,000. The revolving credit facilityincludes a $115,000,000 sublimit for letters of credit. The interest rate foreach borrowing under this revolving credit facility is based, at our election,on either a prime rate-based alternate base rate (ABR) or an adjusted LondonInterbank Offered Rate (LIBOR). Added to either the ABR or LIBOR rates are thefollowing interest rate spreads that decline as our Leverage Ratio (as definedin the 2005 Credit Agreement) declines:

| Leverage Ratio                                           | ** ** | **ABR Spread** | ** ** | **LIBOR Spread** | ** ** |
|---------------------------------------------------------------|------------|---------------------|------------|-----------------------|------------|
|                                                          |       |                | ** ** | ** **            | ** ** |
| Equal to or  greater than 4.0 to 1.0                          |       | 1.25                | %          | 2.25                  | %          |
| Less than 4.0 to  1.0 but equal to or greater than 3.5 to 1.0 |       | 1.00                | %          | 2.00                  | %          |
| Less than 3.5 to 1.0                                          |       | 0.75                | %          | 1.75                  | %          |

 

Commitment fees are calculated as 0.5% of the dailyaverage unused amount of the revolving loan commitment. Interest payments aredue at each quarter end for interest related to alternate base rate borrowingsand at the end of each loan period, but not less frequently than quarterly, forLIBOR borrowings. There were no outstanding borrowings under our revolvingcredit facility at December 31, 2005 and 2006. There were $21,570,000 ofavailable borrowings reserved for letters of credit at December 31, 2006.This facility was terminated on January 31, 2007 as part of the HPTTransaction. See Note 13 for additional information regarding thisfacility and all of our indebtedness.

**13.****       Long Term Debt**

Long term debt (net of unamortized discount) consistedof the following:
| ** **                                    | ** ** | ** **   | ** ** | **December 31,**                        | ** ** |
|-----------------------------------------------|------------|--------------|------------|----------------------------------------------|------------|
| ** **                                    | ** ** | **Maturity** | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | ** **   | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                          |       |         |       |                                         |       |   |   |
| 2005 Term Loan                                |       | 2011         |       | $                                            | 680,000    |   | $ | 673,200 |   |
| Note payable                                  |       | 2018         |       | 3,717                                        |       | 3,508 |   |
| Total                                         |       |         |       | 683,717                                      |       | 676,708 |   |
| Less: amounts  due within one year            |       |         |       | 7,009                                        |       | 7,019 |   |
| Less:  unamortized discount                   |       |         |       | 1,070                                        |       | 955 |   |
|                                          |       |         |       |                                         |       |   |   |
| Long term debt  (net of unamortized discount) |       |         |       | $                                            | 675,638    |   | $ | 668,734 |   |

 

F-29

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*2005 Term Loan.*    On June 30, 2005, we completed a refinancing, whichwe refer to as the “2005 Refinancing.” In the 2005 Refinancing, we borrowed$680,000,000 under our Amended and Restated Credit Agreement datedJune 30, 2005, which we refer to as the “2005 Credit Agreement” and whichconsisted of a fully drawn $680,000,000 term loan facility and an undrawn$150,000,000 revolving credit facility (see Note 12). Term loan principalpayments of $1,700,000 were due at each quarter end, beginning March 31,2006, through September 30, 2011, with the remaining balance due at maturity.The term loan facility was to mature on December 1, 2011 and the revolvingcredit facility was to mature on October 1, 2008. Interest accrued atvariable rates based, at our election, on adjusted LIBOR plus 1.75% or a primerate-based alternate base rate (ABR) plus 0.75%. We had the option to selectwhich rate will be applied at the beginning of each loan period, the term ofwhich, for LIBOR borrowings, varied, at our election, from one to six monthsand, for alternate base rate borrowings, extended until we elected to convertto LIBOR borrowings. At December 31, 2006, the term loan was comprised ofborrowings at a rate of 7.1% for interest periods that ended on January 31,2007. Interest payments were due at each quarter end for interest related to ABRborrowings and at the end of each loan period, but not less frequently thanquarterly, for LIBOR borrowings.  Thisindebtedness was repaid in full and the 2005 Credit Agreement was terminated onJanuary 31, 2007 as part of the HPT Transaction.

*Note Payable.*    On September 1, 1998, in connection with thepurchase of the operating assets of a leased travel center, we issued a notepayable to the former operator of the travel center for $4,919,000. The notebore interest at 5% and required quarterly payments of principal and interestof $98,000 through October 1, 2018. The note was recorded net of adiscount of $1,875,000. This note was collateralized by a mortgage interest inthe related travel center.  This indebtednesswas repaid in full on January 31, 2007 as part of the HPT Transaction.

*Debt Extinguishments Expense andDebt Issuance Costs.*     As part of the2004 Refinancing, we amended and restated our 2000 Credit Agreement, and theborrowings thereunder. In 2004 we recognized a charge to debt extinguishmentand refinancing expense of $1,699,000 and we capitalized as deferred financingcosts $8,720,000 of costs associated with the additional borrowings under the2004 Credit Agreement. As part of the 2005 Refinancing, we recognized a chargeto debt extinguishment and refinancing expense of $39,566,000 and wecapitalized as deferred financing costs $5,039,000 of costs associated with theadditional borrowings under the 2005 Credit Agreement.  The full amount of unamortized deferredfinancing costs and unamortized debt discount was charged to expense in January2007 as a result of the HPT Transaction.

*Pledged Assets.*    The borrowings under the 2005 Credit Agreement werecollateralized by mortgages on substantially all of our property and equipment,liens on all of our accounts receivable and inventories and security agreementsrelated to our cash balances and significant operating contracts, all of whichwere cancelled and released as a result of the HPT Transaction.

*Fair Value*.   Thefair value of long-term debt at December 31, 2005 and 2006 was $684,717,000 and$676,708,000, respectively.

**14.****       Leasing Transactions**

*As a lessee.*    We have entered into lease agreements covering certainof our travel center locations, warehouse and office space, computer and officeequipment and vehicles. Most long-term leases include renewal options and, incertain cases, they include escalation clauses and purchase options. Futureminimum lease payments required under operating leases that had remainingnoncancelable lease terms in excess of one year, as of December 31, 2006,were as follows:

F-30

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| **Year Ending December 31,** | ** ** | **Minimum Lease  Payments**         | ** ** |
|---------------------------------------------|------------|------------------------------------------|------------|
| ** **                                  | ** ** | **(In Thousands of  Dollars)** | ** ** |
|                                        |       |                                     |       |
| 2007                                        |       | $                                        | 13,585     |   |
| 2008                                        |       | 12,658                                   |       |
| 2009                                        |       | 10,475                                   |       |
| 2010                                        |       | 9,626                                    |       |
| 2011                                        |       | 9,338                                    |       |
| Thereafter                                  |       | 64,277                                   |       |
|                                        |       |                                     |       |
|                                        |       | $                                        | 119,959    |   |

 

Rent expense under our operating leases is included inboth operating expenses and selling, general and administrative expenses in ourconsolidated statement of operations and comprehensive income (loss) andconsisted of the following:
| ** **          | ** ** | **Year Ended December 31,**   | ** ** |
|---------------------|------------|----------------------------------------------|------------|
| ** **          | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **          | ** ** | **(In Thousands of Dollars)** | ** ** |
| ** **          | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Minimum rent        |       | $                                            | 23,780     |   | $ | 15,978 |   | $ | 16,962 |   |
| Contingent rent     |       | (2,294                                       | )          | 101 |   | 107 |   |
|                |       |                                         |       |   |   |   |   |
| Total rent  expense |       | $                                            | 21,486     |   | $ | 16,079 |   | $ | 17,069 |   |

 

Contingent rent represents the increases or decreasesin lease payments that result from changes after the inception of the lease inthe factors on which the lease payments are based. For us, contingent rentrelates to those leases that provide for increases in rent payments based onchanges in the consumer price index, increases in rent payments based on thelevel of sales and/or operating results of the leased travel center, andchanges in rent payments based on changes in interest rates, specificallyLIBOR.

*As a lessor.*    Ten of the travel centers we owned were leased tofranchisees under operating lease agreements during the year endedDecember 31, 2006. Our lease agreements provide for initial terms of tenyears with two renewal terms of five years each. These leases include rentescalations that are contingent on future events, namely inflation or capitalimprovements. Rent revenue from such operating lease arrangements totaled$5,655,000, $4,907,000 and $4,566,000 for the years ended December 31,2004, 2005 and 2006, respectively. At December 31, 2006, the cost andaccumulated depreciation of the assets covered by these lease agreements was$29,597,000 and $17,107,000, respectively. Future minimum lease paymentsreceivable under these operating leases as of December 31, 2006 were asfollows:

F-31

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| **Year Ending December 31,** | ** ** | **Minimum Lease  Payments**             | ** ** |
|---------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                  | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                        |       |                                         |       |
| 2007                                        |       | $                                            | 3,979      |   |
| 2008                                        |       | 3,979                                        |       |
| 2009                                        |       | 3,979                                        |       |
| 2010                                        |       | 3,979                                        |       |
| 2011                                        |       | 3,979                                        |       |
| Thereafter                                  |       | 2,350                                        |       |
|                                        |       |                                         |       |
|                                        |       | $                                            | 22,245     |   |

 

**15.****       Redeemable Equity**

At each of December 31, 2005 and 2006, there were180,305 shares of our common stock owned by certain of our managementemployees. We refer to these shares of common stock as management shares. Forthe purchase of management shares, each of the management employees who enteredinto the management subscription agreement received financing from us for nomore than one-half of the purchase price of the management shares. Inconnection with this financing each management employee executed a note in ourfavor and a pledge agreement. At each of December 31, 2005 and 2006, theaggregate principal amount of such notes due us from the management employeeswas $1,022,000 and was reflected as a reduction to the redeemable equitybalance.

Under the terms of the management subscription agreementsand other agreements governing the management shares, the management employeeshave rights to require us to repurchase the management shares at fair marketvalue upon the employee’s termination of employment due to death, disability orscheduled retirement. Repurchase will generally be for cash at the fair marketvalue on the date of termination if termination is due to death or disabilityor scheduled retirement at or after age 62, or for cash in installments over aperiod of years at fair market value each year if termination is due toscheduled retirement prior to age 62. Prior to an initial public offering ofour common stock, the fair market value is determined by a formula set forth inthe agreement that can be modified by the Board of Directors. The formula tocalculate the fair market value is (A) the product of (1) amultiplier and (2) EBITDA (as defined in our bank debt agreement) for themost recent four consecutive full fiscal quarters, plus (B) consolidatedcash and cash equivalents in excess of $10,000,000, minus (C) consolidatedindebtedness, divided by (D) the total number of shares of common stockoutstanding on a fully diluted basis assuming full conversion and exercise ofall common stock equivalents and similar stock rights.

If there is a change of control of us which involvesthe sale by stockholders of their equity interest to a third party during thetime that installments are being paid to the management employees, we willaccelerate the installment payments at the time of the close of the change ofcontrol. In other cases of termination, we will have call rights at fair marketvalue that generally will be exercised for cash, although in limitedcircumstances the call rights may be exercised by promissory note. In allcases, repurchase rights are restricted under law, credit agreements, financingdocuments and other contracts, and our board’s good faith determination thatrepurchases would not cause undue financial strain on us. The 2005 CreditAgreement limits our ability to repurchase the management shares. The amountpaid upon repurchase of any management shares will be reduced by the principalbalance of and unpaid accrued interest on the related notes receivable. At thepoint in time that redemption of shares of redeemable common stock becomesprobable, the fair value of the shares will be accreted to their estimatedredemption value by a charge to nonredeemable stockholders’ equity. Such acharge to nonredeemable stockholders’ equity will occur only if our value, andtherefore the fair value of our common stock, has increased. Our policy is toconsider redemption of an individual stockholder’s shares probable at the timethat the stockholder provides notice of his or her intention to retire, dies oris declared disabled.

F-32

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**16.****       Nonredeemable Stockholders’ Equity**

Common stock and other nonredeemable stockholders’equity consisted of the following:
| ** **                                                                                                                                       | ** ** | **December 31,**                        | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                       | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                                                                                                                                       | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                                                                                                             |       |                                         |       |   |   |
| Common  Stock—20,000,000 shares authorized, $0.00001 par value, 6,937,003 shares issued  and outstanding at December 31, 2005 and 2006 |       | $                                            | 3          |   | $ | 3 |   |
| Accumulated  other comprehensive income                                                                                                          |       | 2,066                                        |       | 1,383 |   |
| Additional  paid-in capital                                                                                                                      |       | 224,413                                      |       | 224,565 |   |
|                                                                                                                                             |       |                                         |       |   |   |
| Total                                                                                                                                            |       | $                                            | 226,482    |   | $ | 225,951 |   |

 

The numbers of outstanding shares of common stock inthe table include the redeemable shares owned by certain of our managementemployees as discussed in Note 15.

*Merger and Recapitalization*

On May 31, 2000, we and shareholders owning amajority of our voting stock entered into a recapitalization agreement and planof merger, as subsequently amended, with TCA Acquisition Corporation, a newlycreated corporation formed by Oak Hill Capital Partners, L.P. and itsaffiliates, under which TCA Acquisition Corporation agreed to merge with andinto us. This merger was completed on November 14, 2000. Concurrent withthe closing of the merger, we completed a series of transactions to effect arecapitalization that included the following.

·                  TCA AcquisitionCorporation issued 6,456,698 shares of common stock to Oak Hill and otherinstitutional investors for proceeds of $205,000,000 and then merged with andinto us. We incurred $3,015,000 of fees and expenses related to the issuance ofthese shares of common stock. These stock issuance costs were charged againstadditional paid-in capital.

·                  We redeemed allshares of our common and preferred stock outstanding prior to the closing ofthe merger, with the exception of 473,064 shares of common stock with a marketvalue at that time of $15,020,000 that were retained by continuingstockholders, and cancelled all outstanding common stock options and warrants,for cash payments totaling $263,153,000.

·                  All shares oftreasury stock were cancelled.

After the transactionsdescribed above, Oak Hill owned 60.5% of our outstanding common stock, theOther Investors owned, in the aggregate, 32.7% of our outstanding common stock,Freightliner owned 4.3% of our outstanding common stock and certain members ofour management owned 2.5% of our outstanding common stock. The total amount ofour equity capitalization after these transactions, given the $31.75 per sharemerger consideration that was paid in our merger and recapitalizationtransactions, was $220,020,000. The transactions described above, whichresulted in a change of control over us, have been accounted for as a leveragedrecapitalization, as opposed to a purchase business combination, since thechange of control was effected through issuance of new shares to our newcontrol group in conjunction with a redemption of most of our then outstanding

F-33

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equity securities. Wefollowed leveraged recapitalization accounting because of the significance ofthe ownership interest in us that was retained by continuing stockholders. Inaccounting for our leveraged recapitalization, we retained the historical costbases of our assets and liabilities and consequently recorded charges totaling$178,965,000 to our equity accounts upon the redemption of equity securities.This accounting treatment contrasts with that followed in a purchase businesscombination, in which a company reflects the new basis in its assets andliabilities of its new control group by increasing or decreasing its historicalbalances based on the estimated fair values at that time and avoids the chargeto equity that accompanies the redemption of equity securities.

*Other Common Stock Issuances*

During the year ended December 31, 2005, weissued 2,434 shares of common stock to a member of management for cash andnotes receivable (see Notes 15 and 19) aggregating $77,000.

*Preferred Stock*

The board of directors has the authority to issuepreferred stock in one or more classes or series and to fix the designations,powers, preferences and dividend rates, conversion rights, terms of redemption,and liquidation preferences and the number of shares constituting each class orseries. Our authorized capital stock includes 5,000,000 shares of preferredstock with a par value of $0.00001. No preferred stock has been issued.

*Common Stock*

*Voting Rights.*  Each share of common stock entitles theholder to one vote on all matters submitted to a vote of our stockholders.

*Dividends  *Holders of common stockare entitled to receive dividends if, as and when declared by our board ofdirectors out of funds legally available. Our debt agreements limit the amountof dividends we are able to pay.

*Liquidation Rights and OtherRights. * Upon our liquidation, dissolution or windingup, the holders of our common stock will be entitled to share pro rata in thedistribution of all of our assets remaining after satisfaction of all of ourliabilities and the payment of the liquidation preference of any outstandingpreferred stock. The holders of our common stock do not have any conversion,redemption or preemptive rights.

*Repurchase Rights.  *Certain members of oursenior management have purchased shares of our common stock pursuant toindividual management subscription agreements. We have the right to repurchase,and the employees have the right to require us to repurchase, subject tocertain limitations, at fair market value, these shares of common stock upontermination of employment due to death, disability or a scheduled retirement.These shares are classified as redeemable equity in our consolidated balancesheet (see Note 15).

*Registration Rights*

Under a stockholders’ agreement to which all of ourstockholders are party, certain of our stockholders have the right, undercertain circumstances, to require us to register under the Securities Act of1933 shares of our common stock held by them and allow them to include sharesof common stock held by them in a registration under the Securities Actcommenced by us.

F-34

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*Common Stock Warrants*

In connection with the issuance of our SeniorSubordinated Notes due 2009 as part of our merger and recapitalizationtransactions, we issued warrants exercisable for shares of our common stock.The warrants were issued under a warrant agreement between us and State StreetBank and Trust Company (now US Bank), as warrant agent. We originally issuedthe warrants in connection with a private placement of 190,000 units, each unitconsisting of one Senior Subordinated Note due 2009 and four warrants. Eachwarrant entitles its holder to purchase 0.36469 shares of our common stock atan exercise price of $0.001 per share, subject to anti-dilution adjustmentsunder some circumstances. At the time of their issuance in November 2000,each warrant had a fair value of $11.579, or $31.75 per share for each shareissuable upon the exercise of the warrants. We have no warrants outstanding otherthan the 760,000 warrants issued as part of the unit offering in 2000.  All of the warrants were redeemed as part ofthe HPT Transaction in January 2007.

*Exercise of Warrants.*

The warrants may be exercised at any time. However,holders of warrants will be able to exercise their warrants only if theexercise of the warrants is exempt from the requirements of the Securities Actand only if the shares of common stock are qualified for sale or exempt fromqualification under the applicable securities laws of the states or otherjurisdiction in which the holders reside. Unless earlier exercised, thewarrants will expire on May 1, 2009.

At our option, fractional shares of common stock maynot be issued upon exercise of the warrants. If any fraction of a share of commonstock would, except for the foregoing provision, be issuable upon the exerciseof any warrants, we will pay an amount in cash equal to the current marketvalue per share of common stock, as determined on the day immediately precedingthe date the warrant is presented for exercise, multiplied by the fraction,computed to the nearest whole cent.

The exercise price and the number of shares of commonstock issuable upon exercise of a warrant are both subject to adjustment incertain cases.

*No Rights as Stockholders.*

The holders of unexercised warrants are not entitled,as such, to receive dividends, to vote, to consent, to exercise any preemptiverights or to receive notice as our stockholders of any stockholders meeting forthe election of our directors or any other purpose, or to exercise any otherrights whatsoever as our stockholders.

*Stock Option Plan*

During 2001, we granted to certain of our executivesnon-qualified options to purchase 944,881 of our common shares. The optionshave a term of 10 years but could be terminated earlier if certaincustomary events occur. Each option grant consisted of 41.67% time options and58.33% performance options. In April 2006, we amended the optionagreements, primarily affecting vesting of the performance options. Optionholders have rights to require us to repurchase shares obtained by exercisingvested options upon a termination of employment due to disability, death or,subject to a six month holding period, scheduled retirement, and, in certainlimited cases, upon a change of control.

Time options became exercisable with the passage oftime, generally vesting 20% per year over a period of five years. As ofDecember 31, 2005, all outstanding time options were fully vested andexercisable. The time options are subject to fixed plan accounting.

F-35

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Performance options become exercisable based on ourstockholders achieving certain investment return targets. Class A andClass B performance options differ only in vesting. Class Aperformance options vested if the achieved internal rate of return was at least22.5%. The Class B performance options vested on a pro-rata basis if theachieved rate of return exceeded 22.5%, up to 30.0%. A measurement date wasgenerally defined in the original option agreements as the earliest of(1) November 14, 2005, (2) specified dates following an initialpublic offering of our shares, or (3) the date that at least 30% of ourshares owned by a specified stockholder are distributed to its limited partnersor sold. The April 2006 amendments replaced the November 14, 2005date with December 31, 2005, which was the earliest of the variouspossible measurement dates enumerated in the option agreements and, therefore,was the measurement date for purposes of determining the vesting of theClass A performance options. The estimated value of our common shares asof December 31, 2005 was $86.83 per share, which resulted in a rate ofreturn of 22.5% and, therefore, the Class A performance options were fullyvested as of December 31, 2005. The April 2006 amendments alsorevised the measurement date for the Class B performance options such thatone half of those options had a measurement date of April 6, 2006 andvested as of that date, and the other half of those options will vest on apro-rata basis as of the date of any future change of control if the shareprice realized is between $102.73 and $117.83 per share.  The unvested options were fully vested uponthe closing of the HPT Transaction on January 31, 2007.

We accounted forthe stock options under the recognition and measurement principles of both APB25 and FAS 123R. The time options and Class A performance optionswere accounted for under APB 25. There was no share based compensation expenserelated to the time options. The performance options were subject to variable planaccounting and, accordingly, a noncash charge to earnings was required when itbecame probable that the performance triggers for such options would beachieved.  Until the fourth quarter of2005, we did not believe it was probable the performance triggers would beachieved and, therefore, during the fourth quarter of 2005 share basedcompensation expense of $8,670,000  wasrecognized with respect to the Class A performance options through the endof the related vesting period in December 2005. As the amendments to theClass B performance options were made after January 1, 2006, the datewe adopted FAS 123R (see Note 2), the recognition of share basedcompensation expense related to those options is subject to the requirements ofFAS 123R. For the Class B performance options that vested inApril 2006, we used the Black-Scholes option pricing model to estimate thegrant date fair value of the options of $59.08. The following assumptions wereused in this calculation: a risk free interest rate of 4.85%, a dividend yieldof 0.0%, a volatility factor of 42.0% and an expected life of the options ofsix months. We recognized share based compensation expense of $11,620,000 withrespect to these options. The intrinsic value of these options was $58.31 onthe date of the modification and, as a result, $11,468,000 of the share basedcompensation expense was classified as redeemable equity in our consolidatedbalance sheet. For the remaining unvested options that vest upon a change ofcontrol, we used a binomial lattice based option pricing model to estimate thegrant date fair value of the options of $21.70. The following assumptions wereused in this calculation: a risk-free interest rate of 4.85%, a dividend yieldof 0.0%, a volatility factor of 42.0% and an expected life of the options ofsix to twelve months. We did not recognize share based compensation expensewith respect to these options until January 2007 when vesting of the optionswas considered probable as a result of the HPT Transaction.  The amount of share based compensationexpense recognized in January 2007 in relation to the outstanding options thatwere not yet vested at December 31, 2006 was $4,268,000.

In addition to the compensation expense charges madein connection with options as described above, we also recognized share basedcompensation expense with respect to redeemable shares of common stock that areconsidered to be probable of being redeemed. The following table sets forth thecomposition of share compensation expense.

F-36

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| ** **                                                                      | ** ** | **Year Ended December 31,**   | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                      | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                      | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                                            |       |                                         |       |   |   |   |   |
| Share based  compensation expense consisted of:                                 |       |                                         |       |   |   |   |   |
| Expense under APB 25 related to Class A performance  options                    |       | $                                            | —     |   | $ | 8,670 |   | $ | — |   |
| Expense under FAS 123R related to vested  Class B performance options |       | —                                       |       | — |   | 11,620 |   |
| Expense related to outstanding redeemable shares                                |       | 65                                           |       | 251 |   | 310 |   |
| Total share based  compensation expense                                         |       | $                                            | 65         |   | $ | 8,921 |   | $ | 11,930 |   |

 

The followingtable illustrates the effect on net income (loss) if we had applied the fairvalue recognition provisions of FAS 123 to all share based paymenttransactions.
| ** **                                                                                                                            | ** ** | **Year Ended December 31,**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                            | ** ** | **2004**                                     | ** ** | **2005** | ** ** |
| ** **                                                                                                                            | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                                                                                                  |       |                                         |       |   |   |
| Net income  (loss), as reported                                                                                                       |       | $                                            | 14,862     |   | $ | (2,095 | ) |
| Add back: Share based compensation expense, net of related  tax effects, included in net income as reported                           |       | 41                                           |       | 5,237 |   |
| Deduct: Total share based compensation expense  determined under fair value based methods for all awards, net of related tax  effects |       | (715                                         | )          | (2,008 | ) |
|                                                                                                                                  |       |                                         |       |   |   |
| Pro forma net  income                                                                                                                 |       | $                                            | 14,188     |   | $ | 1,134 |   |
|                                                                                                                                  |       |                                         |       |   |   |
| Pro forma net  income, per share:                                                                                                     |       |                                         |       |   |   |
| Basic                                                                                                                                 |       | $                                            | 2.05       |   | $ | 0.16 |   |
| Diluted                                                                                                                               |       | $                                            | 1.95       |   | $ | 0.15 |   |

 

The fair value of the options subject to APB 25accounting, all of which were granted in 2001, that was used to calculatethe pro forma compensation expense amounts was estimated to be $13.43 peroption at the date of grant using the Black-Scholes option pricing model withthe following weighted average assumptions: a risk-free interest rate of 5.5%,a dividend yield of 0.0%, a volatility factor of 0.0001%, and an expected lifeof the options of ten years.

*Stock Option Status Summary.*    The following table reflects the status and activity ofoptions under our stock plans for the year ended December 31, 2006:
| Options  outstanding, beginning of year                                                             |   | 939,375 |   |
|-----------------------------------------------------------------------------------------------------|--------|---------|--------|
| Granted                                                                                             |   | —  |   |
| Exercised                                                                                           |   | —  |   |
| Cancelled                                                                                           |   | —  |   |
| Options  outstanding, end of year                                                                   |   | 939,375 |   |
| Options  exercisable, end of year                                                                   |   | 742,708 |   |
| Options  available for grant, end of year                                                           |   | —  |   |
| Weighted average  remaining contractual life of options both outstanding and exercisable, in  years |   | 4       |   |

 

The exercise price was $31.75 per share for alloutstanding options as of December 31, 2004, 2005 and 2006.

F-37

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**17.  IncomeTaxes**

The provision for income taxes was as follows:
| ** **               | ** ** | **Year Ended December 31,**   | ** ** |
|--------------------------|------------|----------------------------------------------|------------|
| ** **               | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **               | ** ** | **(In Thousands of Dollars)** | ** ** |
| Current tax  provision:  |       |                                         |       |   |   |   |   |
| Federal                  |       | $                                            | 210        |   | $ | (135 | ) | $ | 7,566 |   |
| State                    |       | 2,264                                        |       | 1,249 |   | 1,462 |   |
| Foreign                  |       | 24                                           |       | (40 | ) | 1 |   |
|                     |       | 2,498                                        |       | 1,074 |   | 9,029 |   |
|                     |       |                                         |       |   |   |   |   |
| Deferred tax  provision: |       |                                         |       |   |   |   |   |
| Federal                  |       | 7,333                                        |       | 1,341 |   | 8,560 |   |
| State                    |       | (1,359                                       | )          | (44 | ) | 925 |   |
| Foreign                  |       | —                                       |       | (62 | ) | (237 | ) |
|                     |       |                                         |       |   |   |   |   |
|                     |       | 5,974                                        |       | 1,235 |   | 9,248 |   |
| Total tax provision      |       | $                                            | 8,472      |   | $ | 2,309 |   | $ | 18,277 |   |

The difference between taxes calculated at the U. S.federal statutory tax rate of 35% and our total income tax provision is as follows:
| ** **                                                  | ** ** | **Year Ended December 31,**   | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                  | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                  | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                        |       |                                         |       |   |   |   |   |
| U.S. federal  statutory rate applied to income before taxes |       | $                                            | 8,167      |   | $ | 75 |   | $ | 17,259 |   |
| State income taxes, net of federal income tax  benefit      |       | 113                                          |       | 781 |   | 1,560 |   |
| Non-deductible meals and entertainment expenses             |       | 214                                          |       | 236 |   | 270 |   |
| Loss (gain) related to seized funds                         |       | —                                       |       | 1,810 |   | (429 | ) |
| Other non-deductible expenses                               |       | 58                                           |       | 126 |   | 85 |   |
| Benefit of tax credits                                      |       | (358                                         | )          | (438 | ) | (600 | ) |
| Adjustment of estimated prior year tax liabilities          |       | 210                                          |       | (166 | ) | 365 |   |
| Taxes on foreign income at different than U.S. rate         |       | (31                                          | )          | (113 | ) | 6 |   |
| Other—net                                              |       | 99                                           |       | (2 | ) | (239 | ) |
|                                                        |       |                                         |       |   |   |   |   |
| Total tax provision                                         |       | $                                            | 8,472      |   | $ | 2,309 |   | $ | 18,277 |   |

 

F-38

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Deferred income tax assets and liabilities resultedfrom the following:
| ** **                                           | ** ** | **December 31,**                        | ** ** |
|------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                           | ** ** | **2005**                                     | ** ** | **2006** | ** ** |
| ** **                                           | ** ** | **(In Thousands of Dollars)** | ** ** |
| Deferred tax  assets:                                |       |                                         | ** ** | ** ** | ** ** |
| Accounts receivable                                  |       | $                                            | 652        | ** ** | $ | 506 |   |
| Inventory                                            |       | 659                                          |       | 667 |   |
| Intangible assets                                    |       | 2,480                                        |       | — |   |
| Deferred revenues                                    |       | 1,957                                        |       | 2,066 |   |
| Minimum tax credit                                   |       | 3,455                                        |       | 10,483 |   |
| Net operating loss carryforward (expiring 2007-2025) |       | 16,759                                       |       | 757 |   |
| Foreign tax credit carryforwards                     |       | 111                                          |       | — |   |
| General business credits (expiring 2009-2026)        |       | 6,357                                        |       | 7,022 |   |
| Other accrued liabilities                            |       | 12,544                                       |       | 17,468 |   |
|                                                 |       |                                         |       |   |   |
| Total deferred tax assets                            |       | 44,974                                       |       | 38,969 |   |
|                                                 |       |                                         |       |   |   |
| Deferred tax  liabilities:                           |       |                                         |       |   |   |
| Property and equipment                               |       | (35,547                                      | )          | (38,565 | ) |
| Intangible assets                                    |       | —                                       |       | (186 | ) |
| Other comprehensive income                           |       | (823                                         | )          | (466 | ) |
|                                                 |       |                                         |       |   |   |
| Total deferred tax liabilities                       |       | (36,370                                      | )          | (39,217 | ) |
|                                                 |       |                                         |       |   |   |
| Net deferred tax  assets (liabilities)               |       | $                                            | 8,604      |   | $ | (248 | ) |

Our federal income tax returns for 2003 through 2006are subject to examination by the Internal Revenue Service, or IRS, and certainof our state income tax returns for various states for various years from 2001through 2006 are subject to examination by the respective state taxauthorities. We believe we have made adequate provision for income taxes andinterest that may become payable for years not yet examined.

**18.  Equity Investment**

We owned 21.5% of the voting stock of Simons Petroleum, Inc.,a privately held company that is a diversified marketer of diesel fuel andother petroleum products to trucking fleets and other customers in theenergy-related and trucking industries, until April 9, 2004 when we soldthe Simons shares we owned.   The equityincome earned from this investment for the year ended December 31, 2004was $194,000.

After the sale on April 9, 2004, Simons was nolonger an equity investee of ours and, therefore, no longer a related party.The following disclosures include transactions and balances related to ourbusiness activities with Simons only for the period while we were a Simonsstockholder.  During the period fromJanuary 1, 2004 through April 9, 2004, diesel fuel provided by Simonsaccounted for $70,652,000 of our cost of goods sold and we made sales of dieselfuel to Simons in the amount of $152,000. We also leased a travel center fromSimons and the rent expense related to this travel center for the period fromJanuary 1, 2004 through April 9, 2004 was $102,000.

We received cash proceeds from the sale of our Simonsshares of $9,073,000. This sale represented a prepayment event under the 2000Credit Agreement and, therefore, in April 2004 we made a mandatoryprepayment of our term loan borrowings in the amount of $9,073,000. The mergeragreement pursuant to which we sold these shares provided two opportunities forus to receive additional sales proceeds in late 2005: an additional $921,000based on Simons achieving specified earnings targets, and an additional$1,053,000 if certain conditions were met

F-39

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and certain representations and warranties weremaintained. Due to the uncertainty surrounding the future realization of thesereceivables, the gain on sale we recognized in 2004 of $1,615,000 did notreflect these amounts. However, during the third quarter of 2005, theconditions to receive these funds were met, the funds were received and,accordingly, we recognized the related $1,974,000 as gain on sale of investmentduring the third quarter of 2005.

**19.  Related PartyTransactions**

Certain members of our senior management havepurchased common stock pursuant to management subscription agreements (seeNote 15). As a result of such purchases, we have notes and relatedinterest receivable from the management stockholders totaling $1,639,000 and$1,720,000 at December 31, 2005 and 2006, respectively. These notes andthe related interest receivable were cancelled in January 2007.  We also had, until April 2004, transactionswith an equity investee that are described in Note 18.

**20.  Commitments andContingencies**

*Guarantees*

In the normal course of business we periodically enterinto agreements that incorporate indemnification provisions. While the maximumamount to which we may be exposed under such agreements cannot be estimated, itis the opinion of management that any potential indemnification is not expectedto have a material adverse effect on our consolidated financial position orresult of operations. We also offer a warranty of our workmanship in our truckmaintenance and repair shops, but the annual warranty expense and correspondingliability are immaterial.

*Environmental Matters*

Our operations and properties are extensivelyregulated through environmental laws and regulations (“Environmental Laws”)that (i) govern operations that may have adverse environmental effects,such as discharges to air, soil and water, as well as the management ofpetroleum products and other hazardous substances (“Hazardous Substances”), or(ii) impose liability for the costs of cleaning up sites affected by, andfor damages resulting from, disposal or other releases of Hazardous Substances.We own and use underground storage tanks and aboveground storage tanks to storepetroleum products and waste at our travel centers. We must comply withrequirements of Environmental Laws regarding tank construction, integritytesting, leak detection and monitoring, overfill and spill control, releasereporting, financial assurance and corrective action in case of a release froma storage tank into the environment. At some locations, we must also complywith Environmental Laws relating to vapor recovery and discharges to water. Webelieve that all of our travel centers are in material compliance withapplicable requirements of Environmental Laws. While the costs of compliancefor these matters have not had a material adverse impact on us, it isimpossible to predict accurately the ultimate effect changing laws andregulations may have on us in the future. We incurred capital expenditures,maintenance, remediation and other environmental related costs of approximately$7,829,000, $8,752,000 and $7,544,000 in the years ended December 31,2004, 2005 and 2006, respectively.

We have received notices of alleged violations ofEnvironmental Laws, or are aware of the need to undertake corrective actions tocomply with Environmental Laws, at company-owned travel centers in a number ofjurisdictions. We do not expect that any financial penalties associated withthese alleged violations, or compliance costs incurred in connection with theseviolations or corrective actions, will be material to our results of operationsor financial condition. We are conducting investigatory and/or remedial actionswith respect to releases of Hazardous Substances at a number of our sites.While we cannot precisely estimate the ultimate costs we will incur inconnection with the investigation and remediation of these properties, based onour current knowledge, we do not expect that the costs to be incurred at theseproperties, individually or in the aggregate, will be material to our resultsof operations or financial condition.

F-40

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While the matters discussed above are, to the best ofour knowledge, the only proceedings for which we are currently exposed topotential liability, we cannot be certain that additional contamination doesnot exist at these or additional network properties, or that material liabilitywill not be imposed in the future. If additional environmental problems ariseor are discovered, or if additional environmental requirements are imposed bygovernment agencies, increased environmental compliance or remediationexpenditures may be required, and this could have a material adverse effect onus.

Under the environmental agreement entered into as partof the acquisition of the BP network, BP is required to provide indemnificationfor, and conduct remediation of, certain pre-closing environmental conditions.Further, certain of our remediation expenditures are covered by state tankfunds and can be recovered from these funds. In addition, we have obtained insurance of up to $35,000,000 for knownenvironmental liabilities and up to $40,000,000 for unknown environmentalliabilities, subject, in each case, to certain limitations and deductibles.While it is not possible to quantify with certainty the environmental exposure,in our opinion, the potential liability, beyond that considered in the reservewe have recorded, for all environmental proceedings, based on information knownto date, will not have a material adverse effect on our financial condition,results of operations or cash flows.

At December 31, 2006, we had a reserve forenvironmental matters of $10,795,000, a receivable for expected recoveries ofcertain of these estimated future expenditures and cash in an escrow account tofund certain of these estimated future expenditures, leaving an estimated netamount of $1,984,000 to be funded from future operating cash flows. Thefollowing table sets forth the various amounts recorded in our consolidatedbalance sheet as either current or noncurrent assets or liabilities.
| ** **                                                           | ** ** | **As of December 31, 2006** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                           | ** ** | **(In Thousands of Dollars)**    | ** ** |
|                                                                 |       |                                            |       |
| Gross liability  for environmental matters:                          |       |                                            |       |
| Included in the accrued liabilities balance                          |       | $                                               | 4,165      |   |
| Included in the noncurrent liabilities balance                       |       | 6,630                                           |       |
| Total recorded liabilities                                           |       | 10,795                                          |       |
| Less—expected  recoveries of future expenditures:               |       |                                            |       |
| Included in the accounts receivable balance                          |       | 1,950                                           |       |
| Included in the other noncurrent assets balance                      |       | 2,456                                           |       |
| Less-cash in  escrow account included in other noncurrent assets     |       | 4,405                                           |       |
|                                                                 |       |                                            |       |
| Net  environmental costs to be funded by future operating cash flows |       | $                                               | 1,984      |   |

 

The following table sets forth the estimated grossamount of the cash outlays related to the matters for which we have accrued theenvironmental reserve. These cash expenditure amounts do not reflect anyamounts for the expected recoveries as we cannot accurately predict the timingof those cash receipts. These estimated future cash disbursements are subjectto change based on, among other things, changes in the underlying remediationactivities and changes in the regulatory environment.
| **Year Ending December 31,** | ** ** | **Estimated Gross  Future Expenditures** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                  | ** ** | **(In Thousands of   Dollars)**     | ** ** |
|                                        |       |                                               |       |
| 2007                                        |       | $                                                  | 4,165      |   |
| 2008                                        |       | 2,474                                              |       |
| 2009                                        |       | 1,535                                              |       |
| 2010                                        |       | 1,217                                              |       |
| 2011                                        |       | 844                                                |       |
| Thereafter                                  |       | 560                                                |       |
|                                        |       |                                               |       |
|                                        |       | $                                                  | 10,795     |   |

 

F-41

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*Pending Litigation*

We are involved from time to time in various legal andadministrative proceedings and threatened legal and administrative proceedingsincidental to the ordinary course of our business. Except for the Flying Jlitigation described below, we believe that we are not now involved in anylitigation, individually, or in the aggregate, which could have a materialadverse affect on our business, financial condition, results of operations orcash flows.

On February 27, 2006, Flying J, Inc. andcertain of its affiliates filed a lawsuit against us and Pilot Travel Centers,LLC and certain of its affiliates in the U.S. District Court for the Districtof Utah.  Flying J and Pilot arecompetitors of ours.  Flying J alsomarkets a fuel purchasing credit card to trucking companies.  The Flying J lawsuit claims, in essence, thatwe and Pilot have refused to accept the Flying J fuel card, and that suchrefusal was the result of unlawful concerted action.  Flying J is seeking, among other things, aninjunction requiring us and Pilot to accept the Flying J fuel card anddamages.  We believe that there aresubstantial factual and legal defenses to Flying J’s claims.  This case is at an early stage and we cannotestimate our ultimate exposure to loss or liability, if any, related to thislitigation.

Beginning in mid December 2006, and continuing to thepresent, a series of class action lawsuits have been filed against numerouscompanies in the petroleum industry, including TravelCenters ofAmerica, Inc. or its subsidiaries, in United States District Courts in atleast 23 states.   Major petroleumcompanies and significant retailers in the industry have been named asdefendants in one or more of these lawsuits. We have been named in at least seven cases to date, including cases inthe following states:  California,Alabama, New Mexico, Nevada and Missouri.

The plaintiffs in the lawsuits generally allege thatthey are retail purchasers who purchased motor fuel that was greater than 60degrees Fahrenheit at the time of sale.  There are two primary theories upon which the plaintiffs seek recoveryin these cases.  The first theory allegesthat the plaintiffs purchased smaller quantities of motor fuel than the amountfor which defendants charged them because the defendants measured the amount ofmotor fuel they delivered in non-standard gallons which, at highertemperatures, contain less energy.  The “temperature”cases seek, among other relief, an order requiring the defendants to installtemperature correcting equipment on their retail motor fuel dispensing devices,damages, and attorneys’ fees.   Thesecond theory alleges that fuel taxes are calculated in temperature adjusted 60degree gallons and are collected by the government from suppliers andwholesalers, who are reimbursed in the amount of the tax by the defendantretailers before the fuel is sold to consumers. The “tax” cases allege that when the fuel is subsequently sold toconsumers at temperatures above 60 degrees, the retailers sell a greater volumeof fuel than the amount on which they paid tax, and therefore reap a windfallbecause the customers pay more tax than the retailer paid. The “tax” casesseek, among other relief, recovery of excess taxes paid and punitive damages.

We believe that there are substantial factual andlegal defenses to the theories alleged in these so called “hot fuel”lawsuits.  The cases are at an earlystage, with motions to consolidate all the cases with one court pursuant toMulti District Litigation procedures recently filed, and therefore we cannotestimate our ultimate exposure to loss or liability, if any, related to theselawsuits.

OnDecember 7, 2005, the Internal Revenue Service, or IRS, seizedapproximately $5,325,000 from our bank account pursuant to a seizure warrantalleging that these funds were proceeds of alleged illegal gambling operationsconducted by a game vendor of ours in space leased from us at three of ourtravel centers in Maryland. A complaint for forfeiture was filed by theMaryland U.S. Attorney’s Office, and we filed a statement of interest in theseized funds and an answer denying liability. Due to our loss of control over these funds, we expensed as an operatingexpense the full amount seized in December 2005.  In December 2006, we reached a settlementagreement

F-42

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with the IRS under which$1,262,000 of the seized funds will be returned to us and we forfeited allinterest in the remaining seized funds without an admission of liability.  We recognized a receivable and a reduction ofoperating expenses of $1,262,000 in December 2006 and received the funds inMarch 2007.  As part of our agreementwith the game vendor, the vendor indemnified us against losses such as those wehave incurred, but it is uncertain whether we will be able to recover all or aportion of our losses from the game vendor and a receivable for anyindemnification proceeds has not been recognized.

**21.  DerivativeFinancial Instruments and Hedging Activities**

We attempt to manage the risk arising from changes ininterest rates by using derivative financial instruments such as interest rateswaps. On August 31, 2005, we entered into five interest rate swapagreements with an aggregate notional principal amount of $272,000,000 toexchange our variable rate of LIBOR plus 1.75% with a fixed interest rate ofbetween 4.12% and 4.135%. The swap agreements matured on September 1,2006. Payments due to or from us under the swap agreements are due quarterly onDecember 1, March 1, June 1 and September 1. The counterpartiesto these swap agreements are five of the largest U.S. banks, each of which is alender under the 2005 Credit Agreement. We had no swap agreements in placethroughout 2003 and 2004 and as of December 31, 2006.

To qualify for hedge accounting, derivative contractsmust meet defined correlation and effectiveness criteria, be designated ashedges and result in cash flows and financial statement effects whichsubstantially offset those of the position being hedged. Amounts receivable orpayable under derivative financial instrument contracts, when recognized, arereported in our consolidated balance sheet. Pursuant to the provisions ofFAS 133, we determined that the interest rate swap agreements were 100%effective and qualified for cash flow hedge accounting.

During the year ended December 31, 2005, the fairvalue of the swap agreement increased from inception through December 31,2005, resulting in the recognition of an asset of $1,021,000 and an increase inother comprehensive income of $674,000 (net of tax).

**22.  OtherInformation**
| ** **                                                           | ** ** | **Year Ended December 31,**   | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                           | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                           | ** ** | **(In Thousands of Dollars)** | ** ** |
| Operating  expenses included the following:                          |       |                                         |       |   |   |   |   |
| Repairs and maintenance expenses                                     |       | $                                            | 12,361     |   | $ | 12,866 |   | $ | 14,066 |   |
| Advertising expenses                                                 |       | $                                            | 5,885      |   | $ | 8,650 |   | $ | 10,005 |   |
| Taxes other than payroll and income taxes                            |       | $                                            | 8,350      |   | $ | 9,629 |   | $ | 8,514 |   |
| 401(k) plan contribution expense                                     |       | $                                            | 1,577      |   | $ | 2,254 |   | $ | 2,376 |   |
| Expense related to loss (return) of control of  seized funds         |       | $                                            | —     |   | $ | 5,325 |   | $ | (1,262 | ) |
|                                                                 |       |                                         |       |   |   |   |   |
| Interest and  other financial costs, net consisted of the following: |       |                                         |       |   |   |   |   |
| Cash interest expense                                                |       | $                                            | (40,795    | ) | $ | (44,371 | ) | $ | (46,893 | ) |
| Cash interest income                                                 |       | 320                                          |       | 579 |   | 2,154 |   |
| Capitalized interest                                                 |       | —                                       |       | 312 |   | 515 |   |
| Amortization of discount on debt                                     |       | (1,704                                       | )          | (1,130 | ) | (115 | ) |
| Amortization of deferred financing costs                             |       | (3,882                                       | )          | (3,908 | ) | (3,143 | ) |
|                                                                 |       |                                         |       |   |   |   |   |
| Interest and  other financial costs, net                             |       | $                                            | (46,061    | ) | $ | (48,518 | ) | $ | (47,482 | ) |
|                                                                 |       |                                         |       |   |   |   |   |
| Other income  (expense), net consisted of the following:             |       |                                         |       |   |   |   |   |
| Equity in earnings of affiliate                                      |       | $                                            | 194        |   | $ | — |   | $ | — |   |
| Gain on sale of investment                                           |       | 1,615                                        |       | 1,974 |   | — |   |
| Debt extinguishment and refinancing expenses                         |       | (1,699                                       | )          | (39,566 | ) | — |   |
| Gain on claim settlements                                            |       | —                                       |       | — |   | 1,250 |   |
| Other income (expense),  net                                         |       | $                                            | 110        |   | $ | (37,592 | ) | $ | 1,250 |   |

 

F-43

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In July 2006 we agreed to settle two claims madein connection with our November 2000 merger and recapitalizationtransactions, one settlement with an insurer from whom we had purchased apolicy related to the transaction and one settlement concerning the portion ofthe purchase price held in escrow by the former shareholders of the Company.The total amount received in July and August 2006 as a result of thesesettlements was $6,850,000, which was recognized in June 2006, togetherwith $1,200,000 of related expenses. Of the total settlement amount, $5,600,000was recognized as a reduction of operating expenses as it represented therecovery of related costs that had been incurred in the current and prioryears. This $5,600,000 was partially offset by the $1,200,000 of relatedexpenses that were also recorded to operating expenses in June 2006. Theremaining $1,250,000 of the settlement amounts represented a gain on claimsettlements and was recognized as non-operating income.

In the process of marketing ourselves for sale, weincurred various costs, primarily with respect to arranging various financingalternatives. As a result of the agreement and plan of merger we signed inSeptember 2006 and which merger was consummated in January 2007 (seeNote 1), we will not pursue these various financing alternatives.Accordingly, we have charged $4,946,000 to expense with respect to such coststhat were incurred during 2006. Additional costs related to the HPT Transaction of at least $48,372,000will be recognized as expense in January 2007, primarily with respect toinvestment banking advisory fees, legal fees and management bonus payments.

In June 2005, we consummated a refinancing of ourindebtedness, which included a tender offer and consent solicitation for theSenior Subordinated Notes we then had outstanding. In connection with thisrefinancing, we incurred charges to expense aggregating $39,566,000, which wascomprised of $17,522,000 of tender premiums paid for the Senior SubordinatedNotes, $19,193,000 to write off unamortized debt issuance costs and debtdiscount related to the Senior Subordinated Notes, and $2,851,000 of other feespaid. In connection with the 2004 Refinancing completed in December 2004, werecognized $1,699,000 of expense related to fees paid in completing thatrefinancing.

During the yearsended December 31, 2004 and 2005, we recognized gains of $1,615,000 and$1,974,000, respectively, in connection with the sale in April 2004 of ourinvestment in Simons Petroleum as further described in Note 18.

**23.  Supplemental CashFlow Information**
| ** **                                                                                                       | ** ** | **Year Ended December 31,**   | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                       | ** ** | **2004**                                     | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                                                       | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                                                                             |       |                                         |       |   |   |   |   |
| Revolving loan  borrowings                                                                                       |       | $                                            | 337,400    |   | $ | 259,000 |   | $ | 18,800 |   |
| Revolving loan  repayments                                                                                       |       | (326,000                                     | )          | (284,000 | ) | (18,800 | ) |
| Revolving loan  borrowings (repayments), net                                                                     |       | $                                            | 11,400     |   | $ | (25,000 | ) | $ | — |   |
|                                                                                                             |       |                                         |       |   |   |   |   |
| Cash paid during  the year for:                                                                                  |       |                                         |       |   |   |   |   |
| Interest (net of amount capitalized)                                                                             |       | $                                            | 41,815     |   | $ | 47,537 |   | $ | 45,128 |   |
| Income taxes (net of refunds)                                                                                    |       | $                                            | 1,611      |   | $ | 1,256 |   | $ | 9,533 |   |
| Inventory, property  and equipment, and goodwill received in liquidation of trade accounts and  notes receivable |       | $                                            | 637        |   | $ | 616 |   | $ | — |   |
| Notes received  upon common stock issuance                                                                       |       | $                                            | —     |   | $ | 38 |   | $ | — |   |

 

F-44

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**Note24.  Selected Quarterly Financial Data(unaudited)**

The following is asummary of our unaudited quarterly results of operations for 2006 and 2005(dollars in thousands, except per share amounts):
| ** **                                    | ** ** | **2006**           | ** ** |
|-----------------------------------------------|------------|--------------------|------------|
| ** **                                    | ** ** | **First  Quarter** | ** ** | **Second  Quarter(1)** | ** ** | **Third  Quarter(2)** | ** ** | **Fourth  Quarter(2)(3)** | ** ** |
| ** **                                    | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total revenues                                |       | $                  | 1,086,358  |   | $ | 1,290,026 |   | $ | 1,302,083 |   | $ | 1,105,046 |   |
| Gross profit  (excluding depreciation)        |       | 147,069            |       | 171,954 |   | 185,217 |   | 155,829 |   |
| Income from  continuing operations            |       | 1,104              |       | 9,967 |   | 14,034 |   | 5,928 |   |
| Net income                                    |       | 1,104              |       | 9,967 |   | 14,034 |   | 5,928 |   |
| Income from  continuing operations per share: |       |               |       |   |   |   |   |   |   |
| Basic                                         |       | 0.16               |       | 1.44 |   | 2.02 |   | 0.85 |   |
| Diluted                                       |       | 0.15               |       | 1.31 |   | 1.84 |   | 0.78 |   |
|                                          |       |               |       |   |   |   |   |   |   |
|                                               |            |                    |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                           | ** ** | **2005**              | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **First  Quarter**(4) | ** ** | **Second  Quarter**(5) | ** ** | **Third  Quarter**(6) | ** ** | **Fourth  Quarter**(3)(5) | ** ** |
|                                                 |       |                  |       |   |   |   |   |   |   |
| Total revenues                                       |       | $                     | 831,454    |   | $ | 962,116 |   | $ | 1,136,405 |   | $ | 1,145,321 |   |
| Gross profit  (excluding depreciation)               |       | 135,021               |       | 158,635 |   | 169,378 |   | 160,373 |   |
| Income from  continuing operations                   |       | (1,221                | )          | (15,229 | ) | 16,838 |   | (2,483 | ) |
| Net income  (loss)                                   |       | (1,221                | )          | (15,229 | ) | 16,838 |   | (2,483 | ) |
| Income (loss)  from continuing operations per share: |       |                  |       |   |   |   |   |   |   |
| Basic                                                |       | (0.18                 | )          | (2.20 | ) | 2.43 |   | (0.36 | ) |
| Diluted                                              |       | (0.18                 | )          | (2.20 | ) | 2.31 |   | (0.36 | ) |
|                                                      |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

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| (1) |   | During the second quarter of 2006 we recognized income  of $5.6 million as a result of settling two claims made in connection with  our November 2000 merger and recapitalization transactions.                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | During the third quarter of 2006, we recognized $4.8  million of expense incurred in the process of marketing ourselves for sale,  primarily with respect to arranging various financing alternatives that were  not pursued to completion. An additional $0.2 million of such costs were  expensed in the fourth quarter of 2006.                                                                                                                                                                                                                                                             |
| (3) |   | In the fourth quarter of 2005, we recognized expense  of $5.3 million in connection with a seizure of this amount of cash by the  Internal Revenue Service, or IRS, which alleged that these funds were  proceeds of alleged illegal gambling operations conducted by a game vendor of  ours at certain of our sites. In the fourth quarter of 2006, we reached a  settlement agreement with the IRS under which the IRS agreed to return $1.3  million of the seized funds and, accordingly, we recognized a $1.3 million  reduction of expense in the fourth quarter of 2006.                |
| (4) |   | In our Quarterly Report on Form 10-Q for the quarter  ended March 31, 2005, we reported an amount for gross profit (excluding  depreciation) that differs from that shown in the table above due to the  correction of errors that were identified in the fourth quarter of 2005.  There were offsetting corrections, one that increased cost of goods sold  (excluding depreciation) and therefore decreased gross profit (excluding  depreciation) by $1.1 million and two that decreased operating expenses by  $1.1 million, such that income from continuing operations was not affected. |
| (5) |   | In the second quarter of 2005, we consummated a  refinancing of our indebtedness and incurred charges to expense aggregating  $39.4 million. An additional $0.2 million of such costs were expensed during  the fourth quarter of 2005.                                                                                                                                                                                                                                                                                                                                                        |
| (6) |   | During the third quarter of 2005, we recognized a  gain of $2.0 million in connection with the sale of our shares of an equity  investee in April 2004 as a portion of the gain was not considered probable  until September 2005.                                                                                                                                                                                                                                                                                                                                                             |

 

F-45

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**TravelCenters of America LLC**

Schedule II

Valuation and Qualifying Accounts
| ** **                                                         | ** ** | **Balance at  Beginning  of  Period**   | ** ** | **Charged  (Credited)  To Income** | ** ** | **Charged to  Other  Accounts** | ** ** | **Deductions  from Reserves** | ** ** | **Balance at  End of  Period** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|------------------------------------------|------------|
| ** **                                                         | ** ** | **(In Thousands of Dollars)** | ** ** |
|                                                               |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Year Ended  December 31, 2004                                      |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Deducted from  accounts and notes receivable for doubtful accounts |       | $                                            | 1,996      |                                    | $          | 307                                  |       | $                                  | —     |                                     | $          | (697 | )(a) | $ | 1,606 |   |
|                                                               |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Year Ended  December 31, 2005                                      |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Deducted from  accounts and notes receivable for doubtful accounts |       | $                                            | 1,606      |                                    | $          | 975                                  |       | $                                  | —     |                                     | $          | (866 | )(a) | $ | 1,715 |   |
|                                                               |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Year Ended  December 31, 2006                                      |       |                                         |       |                                    |       |                                 |       |                               |       |                                     |       |
| Deducted from accounts  and notes receivable for doubtful accounts |       | $                                            | 1,715      |                                    | $          | 40                                   |       | $                                  | —     |                                     | $          | (411 | )(a) | $ | 1,344 |   |

 

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(a)             Uncollectibleaccounts and notes receivable charged off, net of amounts recovered.

S-1

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