<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31,1998

                        Commission file number 333-26497

                         TRAVELCENTERS OF AMERICA, INC.
             (Exact name of Registrant as specified in its charter)

          DELAWARE                                            36-3856519
(State or other jurisdiction of                             (IRS Employer
incorporation or organization)                            Identification No.)

                       24601 Center Ridge Road, Suite 200
                             Westlake, OH 44145-5634
          (Address of principal executive offices, including zip code)

                                 (440) 808-9100
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

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

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

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

As of March 15, 1999, there were outstanding 599,877 shares of Common Stock, par
value $0.01 per share. The outstanding shares of Common Stock of the registrant
were issued in transactions not involving a public offering. As a result, there
is no public market for the registrant's Common Stock.


<PAGE>   2
                                      INDEX
<TABLE>

<S>               <C>                                                                       <C>
PART I
     Item 1.      Business...................................................................2
     Item 2.      Properties.................................................................9
     Item 3.      Legal Proceedings.........................................................11
     Item 4.      Submission of Matters to a Vote of Security Holders.......................11

PART II
     Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters.....12
     Item 6.      Selected Financial Data...................................................13
     Item 7.      Management's Discussion and Analysis......................................14
     Item 7A.     Quantitative and Qualitative Disclosures About Market Risk................26
     Item 8.      Financial Statements and Supplementary Data...............................27
     Item 9.      Changes in and Disagreements With Accountants.............................65

PART III
     Item 10.     Directors and Executive Officers of the Registrant........................66
     Item 11.     Executive Compensation....................................................66
     Item 12.     Security Ownership of Certain Beneficial Owners and Management............66
     Item 13.     Certain Relationships and Related Transactions............................66

PART IV
     Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K...........67

SIGNATURES        ..........................................................................70
</TABLE>



                                       1
<PAGE>   3



                                     PART I

ITEM 1.  BUSINESS

BUSINESS OVERVIEW

         TravelCenters of America, Inc. (the "Company") owns, operates and
franchises more full-service travel centers in the United States than any of its
competitors, with 143 network sites located in 39 states nationwide, including
103 Company operated locations. The Company's travel centers are full service
facilities offering a broad range of fuel and nonfuel products, services and
amenities to trucking fleets, professional truck drivers and other motorists. In
addition to diesel fuel and gasoline, the travel centers provide truck
maintenance and repair services and products, full service and quick serve
restaurant ("QSR") dining, travel and convenience stores, telecommunications
services and various hospitality and rest-related amenities. This broad range of
products and services distinguishes the travel centers from traditional
truckstops, which focus on the sale of diesel fuel, and provides diverse revenue
sources for the Company. In addition, the Company is the only industry
participant with a centralized procurement, warehousing and distribution system.

         The Company's broad range of products and services, together with its
comprehensive geographic coverage, has enabled the Company to become a leading
supplier of diesel fuel to many of the largest long-haul trucking fleets in the
United States. Management believes the Company's position as a leading supplier
of diesel fuel to major trucking fleets positions it to continue to increase its
sales of higher margin nonfuel products and services to fleets and their drivers
as well as to independent drivers.

         The travel centers feature a variety of well recognized national brands
which attract professional truck drivers, motorists and other customers who
often satisfy both fuel and nonfuel needs at the same stop. The Company's
nationally recognized QSR and motel brands include Burger King, Dairy Queen,
Dunkin' Donuts, Kentucky Fried Chicken, Little Caesars, Long John Silver's,
McDonald's, Pizza Hut, Sbarro, Subway, Taco Bell, Wendy's, DayStop, HoJo Inn and
Travelodge. The Company also offers such well recognized gasoline brands as
Amoco, Arco, BP, Chevron, Conoco, Exxon, Mobil, Shell and Unocal 76. This
portfolio of brands strongly appeals to what market research indicates are
customers' priorities of quality, convenience and consistency of product
offerings, as well as cleanliness and safety.


HISTORY AND ORGANIZATION

         The Company was formed in 1992 by an institutional investor group (the
"Investor Group") led by The Clipper Group, L.P. ("Clipper"), as well as certain
then prospective franchisees and individuals who at the time were members of the
Company's management. The Company was originally incorporated as National
Auto/Truckstops Holdings Corporation but changed its name in March 1997. The
Company is a holding company whose sole assets consist of the stock of its three
direct wholly-owned subsidiaries: TA Operating Corporation, d/b/a TravelCenters
of America ("TA"), National Auto/Truckstops, Inc. ("National") and TA Franchise
Systems, Inc. ("TAFSI"). TA has one wholly-owned subsidiary, TA Travel, L.L.C.
("TA Travel"). Prior to March 1997, the Company had two wholly-owned
subsidiaries, National and TA Holdings Corporation ("TA Holdings"). TA Holdings
was the parent of TA, which itself was the parent of TAFSI. In March 1997, a
restructuring was completed whereby the current structure was effected and TA
Holdings was merged into the Company. TA Travel was organized in October 1997.

         The Company's operations are conducted through three distinct types of
travel centers: sites owned or leased by the Company and operated by the Company
("Company-operated Sites"), sites owned or leased by the Company and leased to
independent lessee-franchisees ("Operators") of the Company who operate the
sites ("Leased Sites") and sites owned or leased and operated by independent
franchisees ("Franchisee-Owners") of the Company ("Franchisee-Owner Sites").


                                       2
<PAGE>   4

         In April 1993, the Company acquired (the "National Acquisition") the
truckstop network assets (the "National Network") of a subsidiary of Unocal
Corporation (together with its subsidiaries "Unocal") in a series of asset
purchase transactions. The National Network included a total of 139 facilities,
of which 95 were Leased Sites, 42 were Franchisee-Owner Sites, and two sites
were Company-operated Sites. As part of the National Acquisition, Unocal agreed
to indemnify the Company against certain environmental liabilities occurring
prior to 1993 (the "Unocal Environmental Agreement," see "-Regulation-
Environmental Regulation"), entered into a noncompetition agreement for a
ten-year period terminating on April 13, 2003, granted the Company a license to
use certain Unocal trademarks, and granted the Company a royalty-free license
to use the ACCESS 76 on-line information retrieval and credit card system. The
National Network, which operates under the licensed "Unocal 76" and related
trademarks, has been providing quality products and services for over 35 years
and until 1997 had been the largest chain of full service travel centers or
truckstops, based on number of locations in the United States. Pure Oil Company
("Pure") founded the National Network and Unocal acquired National in
connection with Unocal's merger with Pure in 1965.

         In December 1993, the Company acquired (the "TA Acquisition") the
truckstop network assets (the "TA Network") of certain subsidiaries of The
British Petroleum Company p.l.c. (together with its subsidiaries "BP"). The TA
Network included 38 Company-operated Sites and six Franchisee-Owner Sites. As
part of the TA Acquisition, BP agreed to indemnify the Company against certain
environmental liabilities with respect to which claims are made prior to
December 11, 2004 or December 11, 1996 (the relevant date depending upon the
nature of the underlying claim) ( the "BP Environmental Agreement," see
"-Regulation-Environmental Regulation"), entered into a noncompetition agreement
for a seven-year period commencing on December 10, 1993 and granted the Company
the right, title and interest in and to certain copyrights, trademarks, service
marks and other intellectual property, including, "Truckstops of America," "TA"
and "Country Pride." The TA Network, which now operates under the Company-owned
"TravelCenters of America" and "TA" trademarks, has been providing quality
products and services to the trucking industry and to nonprofessional travelers
for over 30 years, and is now the largest chain of full service travel centers
or truckstops, based on number of locations in the United States. BP, through
its subsidiary formerly known as The Standard Oil Company of Ohio ("Sohio"),
acquired TA from Ryder System, Inc. ("Ryder") in 1984. Ryder founded the TA
Network in 1973.

         In December 1998, the Company acquired (the "Burns Acquisition")
substantially all of the truckstop network assets (the "Burns Network") of Burns
Bros., Inc. and certain of its affiliates (collectively "Burns"). Specifically,
the Company acquired from Burns the land, buildings, equipment and inventories
at 17 of the 19 sites comprising the Travel Stops division of Burns (the two
remaining sites were closed by Burns); the equipment and inventory used in
Burns' fuel wholesaling and transportation businesses and certain accounts
receivable related to the acquired assets. The 17 acquired sites are located in
9 western and north-western states. (See "-Burns Acquisition.")

         On February 26, 1999, the Company entered into a merger agreement
pursuant to which the Company intends to acquire (the "TPOA Acquisition") 100%
of the voting stock of Travel Ports of America, Inc. ("TPOA") at a price of
$4.30 per share. Under the terms of the merger agreement and certain ancillary
agreements, the Company will pay cash of approximately $40.5 million for all of
TPOA's common shares except approximately 653,000 common shares, held by TPOA's
chairman and chief executive officer, that will be exchanged for approximately
85,000 shares of the Company's common stock. In addition, the Company expects to
pay cash of approximately $15 million to $20 million to retire substantially all
of TPOA's indebtedness expected to be outstanding at the merger date and to pay
various costs of the transaction. TPOA operates a network (the "TPOA Network")
of 16 travel centers in seven states, primarily in the northeastern U.S. This
acquisition, if ultimately consummated, is expected to close in June 1999. A
closing of the merger is subject to a variety of conditions, including approval
by TPOA's shareholders.




                                       3
<PAGE>   5


BURNS ACQUISITION

         The Burns Acquisition was closed on December 3, 1998 for a total
acquisition cost of $60.7 million. The total is comprised of cash consideration
to Burns of $56.2 million, cash paid for other acquisition costs of $0.6 million
and assumed liabilities of $3.9 million. The cash used to fund this acquisition
was provided by new borrowings (see "- Refinancings"). For the fiscal year ended
June 30, 1998, the 17 acquired sites sold 162.2 million gallons of diesel fuel
and had nonfuel sales and operating expenses of $44.7 million and $28.1 million,
respectively. The results of operations of the Burns Network sites are included
in the Company's consolidated results only from December 4, 1998. The following
table sets forth selected pro forma financial data assuming the Burns
Acquisition had occurred on January 1, 1998.

<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED DECEMBER 31, 1998
                                                     -----------------------------------------------------------
                                                                                     PRO FORMA
                                                                     THE COMPANY     EFFECT OF
                                                      THE COMPANY    WITHOUT THE     THE BURNS     THE COMPANY
                                                      AS REPORTED    BURNS SITES    ACQUISITION     PRO FORMA
                                                     -------------- -------------- -------------- --------------
                                                                      (IN MILLIONS OF DOLLARS)

<S>                                                       <C>          <C>          <C>             <C>      
Total revenue...........................................  $ 923.8      $ 914.5      $ 146.3         $1,060.8
Gross profit............................................  $ 296.7      $ 293.7      $  38.3         $  332.0
Income from operations..................................  $  19.1      $  18.9      $   5.4         $   24.3
Income (loss) before extraordinary item.................  $  (4.2)     $  (4.3)     $   3.3         $   (1.0)
EBITDA(1)...............................................  $  68.7      $  68.2      $   8.5         $   76.7
</TABLE>                                                                

(1)  "EBITDA" is defined as set forth in Note 4 to Selected Financial Data in
     Item 6.

COMBINATION PLAN AND CAPITAL PROGRAM

         Historically, under the Company's ownership, each of the TA and
National Networks (the "Existing Networks") was separately managed and financed.
However, in January 1997 the Company's Board of Directors approved a management
proposal (the "Combination Plan") to integrate the Existing Networks into a
single network (the "Network") to be operated under the TA trademark under the
leadership of a single management team.

         During 1998 and 1997 the Company, pursuant to the Combination Plan,
significantly reshaped the composition of the Existing Networks as follows:

         -  32 Leased Sites were converted to Company-operated Sites, five
            during 1998 and 27 during 1997,

         -  27 Franchisee-Owner Sites were terminated, all during 1997,

         -  Two Company-operated Sites were sold during 1998 and 15 Leased Sites
            were sold during 1997,

         -  All National Network Company-operated Sites were converted to TA
            Network Company-operated Sites during 1997,

         -  Operators of 29 National Network Leased Sites terminated their
            franchise agreements with National and signed franchise agreements
            with TAFSI during the last half of 1997.

         Consequently, and giving effect to the Burns Acquisition, as of
December 31, 1998, the Company's Network was comprised of 141 sites, 17 of which
were operating under Burns Bros. signage which is expected to be substantially
replaced with TA signage during 1999. The remaining two sites are Leased Sites
that continue to operate in the National Network.




                                       4
<PAGE>   6


         In 1997, the Company initiated a capital program to upgrade, rebrand
and reimage the Network's travel centers and to build new travel centers (the
"Capital Program"). Under this Capital Program, as revised as a result of the
Burns Acquisition, the Company intends to invest approximately $260 million in
the Network's sites by the end of 2001, with $150 million having been spent by
the end of 1998. The Operators and Franchisee-Owners will also be investing
additional amounts for reimaging and other projects at the sites they operate.

The following table summarizes the changes in the composition of the Network
since the Combination Plan and Capital Program were implemented.

<TABLE>
<CAPTION>
                                           COMPANY-                     FRANCHISEE-
                                           OPERATED        LEASED          OWNER          TOTAL
                                             SITES          SITES          SITES          SITES
                                         -------------- -------------- -------------- --------------
<S>                                            <C>            <C>            <C>            <C>
Number of  sites at December 31, 1996          58             77             35             170

1997 Activity:
   -New sites                                   -              -              1              1
   -Conversions of Leased Sites to
     Company-operated Sites                    27            (27)             -              -
   -Sales of sites                              -            (15)             -            (15)
   -Terminations of Franchisee-
     Owner Sites                                -              -            (27)           (27)
                                             ------         ------         ------         -----
Number of sites at December 31, 1997           85             35              9             129

1998 Activity:
   -New sites                                   -              -              1              1
   -Conversions of Leased Sites to
     Company-operated Sites                     5             (5)             -              -
   -Sales of sites                             (2)             -              -             (2)
   -Burns Acquisition                          17              -              -             17
                                             ------         ------         ------         ----
Number of sites at December 31, 1998           105            30             10             145

Closed sites (held for sale)                   (2)             -              -             (2)
                                             ------         ------         ------         -----
Number of operating sites at
   December 31, 1998                           103            30             10             143
                                             ======         ======         ======         =====
</TABLE>

REFINANCINGS

         To facilitate the Combination Plan and Capital Program, in March 1997
the Company refinanced the existing indebtedness of TA and National with new
borrowings by the Company (the "1997 Refinancing"). The Company issued $125
million aggregate principal amount of 10 1/4% Senior Subordinated Notes due
2007, entered into a Credit Agreement through which it obtained an $80 million
senior secured term loan facility (the "Term Loan") and a $40 million revolving
credit facility, redeemed all of the then outstanding Subordinated Notes of TA
and National, respectively, and a portion of the Senior Notes of TA (the "TA Old
Senior Notes"), and, pursuant to a Senior Secured Note Exchange Agreement,
exchanged $85.5 million aggregate principal amount of Senior Secured Notes
($35.5 million of Series I Senior Secured Notes and $50 million of Series II
Senior Secured Notes) of the Company for the Senior Notes of National and the
unredeemed TA Old Senior Notes.

         In order to complete the Burns Acquisition and facilitate future
Network growth and development, including the TPOA Acquisition, in December 1998
the Company increased the Term Loan by $150 million (the "1998 Refinancing"). Of
the total amount borrowed, $50 million was utilized to retire the Company's
Series II Senior Secured Notes and $42 million was specified to prefund planned
capital expenditures and business acquisitions. See "Liquidity and Capital
Resources" in Item 7 for further discussion of the 1998 Refinancing.



                                       5
<PAGE>   7


SUPPLY

         The Company purchases fuel from various suppliers at rates that
fluctuate with market prices and reset daily, and resells fuel to certain
franchisees and to the public at prices that the Company establishes daily. By
contracting for only a portion of its monthly diesel fuel requirements and by
establishing supply relationships with an average of four or five alternate
suppliers per location, the Company has been able effectively to create
competition for the Company's business among the Company's various diesel fuel
suppliers on a daily basis. This flexibility has improved the Company's
purchasing position and helped it partially to offset the decline in retail
diesel fuel margins. Other than pipeline tenders, fuel purchases made by the
Company are delivered directly from suppliers' terminals to the travel centers.
The Company operates a small fleet of tankers to haul fuel to certain of its own
sites and to deliver supply to a select number of wholesale customers, but
contracts with common carriers for the majority of its fuel hauling needs. The
Company does not keep substantial quantities of fuel in inventory and is
therefore susceptible to price increases and interruptions in supply. In the
western United States, the Company utilizes pipeline tenders and leased terminal
space to mitigate the risk of supply disruptions. The Company currently engages
in only minimal hedging in connection with its fuel purchases.

CENTRALIZED PURCHASING AND DISTRIBUTION

         The TA Network maintains a dedicated distribution and warehouse center
(the "Distribution Center"). The Distribution Center is the only dedicated
purchasing, warehousing and distribution center in the travel center and
truckstop industry. The Distribution Center is located in Nashville, Tennessee
and has approximately 85,000 square feet of storage space.

COMPETITION

         The travel center and truckstop industry is highly competitive and
fragmented. Based on industry data, the Company believes that there are
approximately 2,500 travel centers and truckstops nationwide, of which
approximately 500 are full service travel centers. In the United States, there
are generally two types of facilities designed to service the trucking industry:
pumper-only truckstops, which provide fuel, typically at discounted prices, with
limited additional services, and full service travel centers, such as those in
the Company's networks, which offer a broad range of products and services to
fleet and independent truck drivers and nontruck traffic, including fuel
products, fast food and casual dining restaurants; truck maintenance and repair
products and services; other driver amenities; and secure parking areas. Fuel
and nonfuel products and services can be obtained by long-haul truck drivers
from a wide variety of sources other than the Company, including regional full
service travel center and pumper-only truckstop chains, independently owned and
operated truckstops, some large service stations and fleet-operated fueling
terminals.

         The Company believes that it experiences substantial competition from
pumper-only truckstop chains and that such competition is based principally on
diesel fuel prices. In the pumper-only truckstop segment, the largest networks
(based on number of facilities and gallons of diesel fuel sold) are Marathon
Ashland Petroleum LLC, selling primarily under the Speedway and SuperAmerica
brandnames, and Pilot Corporation. Additional substantial competition is
experienced from major full service networks and independent chains and is based
principally on diesel fuel prices, nonfuel product and service offerings and
customer service. In the full service travel center segment, the largest
networks (other than the Company) are operated by Flying J Inc. ("Flying J") and
Petro Stopping Centers, L.P.; however, only some of Flying J's sites offer full
service. The Company's vehicle products and truck maintenance and repair service
operations compete with regional full service travel center and truckstop
chains, full service independently owned and operated truckstops, fleet
maintenance terminals, independent garages, truck dealerships and auto parts
service centers. The Company's travel centers compete with a variety of
establishments located within walking distance of its sites, including full
service restaurants, QSRs and electronics, drug, health and beauty aid and
travel and convenience stores.




                                       6
<PAGE>   8


         A significant portion of all intercity diesel fuel consumption by
fleets and companies with their own trucking capability occurs through
self-fueling at both dedicated terminals and at fuel depots strategically
located across the country. Such terminals often provide facilities for truck
maintenance and repair. The Company's pricing decisions for diesel fuel and
repair services cannot be made without considering the existence of these
operations and their capacity for expansion. However, the Company believes that
a trucking industry trend has been to reduce the use of such terminals and to
outsource fuel and repair services in order to maximize the benefits of
competitive fuel pricing, superior driver amenities and reduced environmental
compliance expenditures.

RELATIONSHIPS WITH THE OPERATORS AND FRANCHISEE-OWNERS

         Pursuant to the Combination Plan, the Company offered a new TAFSI
franchise agreement (the "Network Franchise Agreement") and a new lease
agreement (the "Network Lease Agreement" or "Network Lease" and, together with
the Network Franchise Agreement, the "Network Agreements") to certain of
National's then existing Operators, and in connection therewith, upon such
franchisee's acceptance of such offer, terminated the then existing National
lease (the "National Lease Agreement") and National franchise agreement (the
"National Franchise Agreement," and, together with the National Lease Agreement,
the "National Agreements") at those locations. During 1997, 29 former National
Operators signed Network Agreements with the Company. Existing TA
Franchisee-Owners will be allowed to continue their franchises under the Network
Franchise Agreement upon expiration of their existing TA franchise agreements
(the "Existing TA Franchise Agreements"), which have an average remaining term
of approximately seven years.

         TA licenses its trademarks to TAFSI. The Company enters into its
franchise agreements with Operators and Franchisee-Owners of travel centers in
the TA Network through TAFSI, and TAFSI collects franchise fees and royalties
under such agreements. TAFSI's assets consist primarily of the rights under the
Existing TA Franchise Agreements, the Network Franchise Agreements and its
trademark licenses from TA. TAFSI has no significant tangible assets. The
National Franchise Agreements are between National and the respective Operator.

REGULATION

         Franchise Regulation. The relationship between National and the
National Network Operators is governed by the Petroleum Marketing Practices Act
(the "PMPA"), 15 U.S.C. Section 2801 et.seq. The relationship between TAFSI and
the TA Network Operators and Franchisee-Owners is not governed by the PMPA
because TAFSI does not license its franchisees to sell fuel under a refiner's
brand. Among other things, the PMPA limits the circumstances under which
franchisors such as National may terminate or fail to renew a franchise
agreement, and it imposes notification and other requirements in those cases
where termination or nonrenewal is permissible.

         National and TAFSI are also subject to state franchise laws, some of
which require National and TAFSI to register with the state before it may offer
a franchise, require National and TAFSI to deliver specified disclosure
documentation to potential franchisees, and impose special regulations upon
petroleum franchises. Some state franchise laws also impose restrictions on
National's and TAFSI's ability to terminate or not to renew its respective
franchises, and impose other limitations on the terms of the franchise
relationship or the conduct of the franchisor. The PMPA, which applies to the
National Network Operators, preempts state laws with respect to termination or
nonrenewal unless such laws are consistent with the PMPA. Finally, a number of
states include, within the scope of their petroleum franchising statutes,
prohibitions against price discrimination and other allegedly anticompetitive
conduct. These provisions supplement applicable antitrust laws at the federal
and state levels.

         The Company is subject to regulation under the Federal Trade Commission
("FTC") rule entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures," and the FTC requires that
franchisors make extensive disclosure to prospective franchisees but does not
require registration.

         The Company cannot predict the effect of any future federal, state, or
local legislation or regulation on its franchising operations.



                                       7
<PAGE>   9


         Environmental Regulation. The Company's operations and properties are
subject to extensive regulation pursuant to federal, state and local laws,
regulations and ordinances ("Environmental Laws") that (i) govern activities and
operations that may have adverse environmental effects, such as discharges to
air, soil and water, as well as handling, storage and disposal practices for
petroleum products and other hazardous and toxic substances ("Hazardous
Substances") or (ii) impose liability and damages for the costs of cleaning up
sites affected by, and for damages resulting from, past spills and disposal or
other releases of Hazardous Substances.

         The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated Sites and Leased Sites to
store petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company has made necessary upgrades to USTs to comply with federal regulations
which took effect on December 22, 1998, and believes that all of its travel
centers, including those acquired in the Burns Acquisition, are in material
compliance with applicable requirements of Environmental Laws.

         The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connections therewith, will be material to the
Company's results of operations or financial condition. The Company is
conducting investigatory and/or remedial actions with respect to releases and/or
spills of Hazardous Substances that have occurred subsequent to the National
Acquisition and the TA Acquisition. While the Company cannot precisely estimate
the ultimate costs it will incur in connection with the investigation and
remediation of these properties, based on its current knowledge, the Company
does not expect that the costs to be incurred at these properties, individually
or in the aggregate, will be material to the Company's results of operations or
financial condition. While the aforementioned matters are, to the best knowledge
of the Company, the only proceedings for which the Company is currently exposed
to potential liability (particularly given the Unocal and BP indemnities
discussed below), there can be no assurance that additional contamination does
not exist at these or additional network properties, or that material liability
will not be imposed in the future. If additional environmental problems arise or
are discovered, or if additional environmental requirements are imposed by
government agencies, increased environmental compliance or remediation
expenditures may be required, which could have a material adverse effect on the
Company.

         In connection with the National Acquisition, Phase I environmental
assessments of the then 97 Company-owned National Network properties were
conducted. Pursuant to the Unocal Environmental Agreement, Phase II
environmental assessments of all such National properties were completed by
Unocal by December 31, 1998. The Unocal Environmental Agreement provides that
Unocal is responsible for all costs incurred for remediation of environmental
contamination (the remediation must achieve compliance with the Environmental
Laws in effect on the date the remedial action is completed) and for otherwise
bringing the properties into compliance with Environmental Laws (as in effect at
the date of the National Acquisition) with respect to environmental
contamination or non-compliance identified in the Phase I or Phase II
environmental assessments, which environmental contamination or non-compliance
existed on or prior to the date of the National Acquisition. Under the terms of
the Unocal Environmental Agreement, Unocal also must indemnify the Company
against any other environmental liabilities that arise out of conditions at, or
ownership or operations of, the National Network prior to the date of the
National Acquisition. Pursuant to the Unocal Environmental Agreement, Unocal is
obligated to indemnify the Company for claims made before April 14, 2004. Except
as described above, Unocal does not have any responsibility for any
environmental liabilities arising out of the ownership or operations of the
National Network after the date of the National Acquisition. There can be no
assurance that, if additional environmental claims or liabilities were to arise
under the Unocal Environmental Agreement, Unocal would not dispute the Company's
claims for indemnification thereunder.



                                       8
<PAGE>   10


         Prior to the TA Acquisition, all of the then 38 TA locations were
subject to Phase I and Phase II environmental assessments, undertaken at BP's
expense. The BP Environmental Agreement provides that, with respect to
environmental contamination or non-compliance with Environmental Laws identified
in the Phase I or Phase II environmental assessments, BP is responsible for all
costs incurred for remediation of such environmental contamination (the
remediation must achieve compliance with the Environmental Laws in effect on the
date the remedial action is completed) and for otherwise bringing the properties
into compliance with Environmental Laws (as in effect at the date of the TA
Acquisition). The BP Environmental Agreement further provides that BP must
indemnify the Company against any other environmental liabilities that arise out
of conditions at, or ownership or operations of, the TA locations prior to the
date of the TA Acquisition. With respect to liabilities relating to the
investigation and remediation of environmental contamination, BP is obligated to
indemnify the Company for liabilities with respect to which claims are made
before December 11, 2004. With respect to liabilities otherwise relating to
non-compliance with Environmental Laws (for example, equipment), BP is obligated
to indemnify the Company for liabilities with respect to which claims were made
before December 11, 1996. Except as described above, BP does not have any
responsibility for any environmental liabilities arising out of the ownership or
operations of the TA Network after the date of the TA Acquisition. There can be
no assurance that, if additional environmental claims or liabilities were to
arise under the BP Environmental Agreement, BP would not dispute the Company's
claims for indemnification thereunder.

         In connection with the Burns Acquisition, all of the 17 sites acquired
were subject to Phase I environmental assessments. Based on the results of those
assessments nine of the sites were subject to Phase II environmental
assessments. The purchase price paid to Burns was adjusted based on the findings
of the Phase I and Phase II environmental assessments. Under the asset purchase
agreement with Burns (the "Burns Agreement"), the Company released Burns from
any environmental liabilities that may have existed as of the Burns Acquisition
date, other than certain non-waived environmental claims as specified in the
Burns Agreement.

         Other Regulation. The Company, the Operators and the Franchisee-Owners
are required to comply with federal, state and local government regulations
applicable to service station and lubrication operations and consumer food
services businesses generally, including those relating to the preparation and
sale of food, minimum wage requirements, overtime, working, health, fire, safety
and sanitation conditions, mandated health insurance coverage and citizenship
requirements, as well as regulations relating to zoning, construction, business
licensing and employment. The Company believes that it is in material compliance
with the provisions applicable to it and has no knowledge of material violations
of these provisions by its Operators and Franchisee-Owners.

EMPLOYEES

         As of December 31, 1998, the Company employed approximately 9,800
people on a full- or part-time basis. Of this total, approximately 9,490 are
employees at the Company-operated Sites and in fuel transportation,
approximately 250 perform managerial, operational or support services at the
headquarters or elsewhere and approximately 60 employees staff the Distribution
Center. All of the Company's employees are non-union.

ITEM 2.  PROPERTIES

         The Company's principal executive offices are leased and are located at
24601 Center Ridge Road, Suite 200, Westlake, Ohio 44145-5634. The Distribution
Center is a leased 85,000 square foot facility located at 1450 Gould Boulevard,
LaVergne, Tennessee 37086-3535.



                                       9
<PAGE>   11



         Of the 143 Network locations as of December 31, 1998, 103 are
Company-operated Sites, 30 are Leased Sites and the remaining 10 sites are not
owned by the Company. In addition to these operating travel center locations,
the Company has two closed travel center facilities being held for sale and four
travel center sites which are currently under construction pursuant to the
Capital Program. Of these total 139 owned sites, the land and improvements at
three are leased, three are subject to ground leases of the entire site and six
are subject to ground leases of portions of such sites. Both the land and
improvements at one of the four sites being developed will be leased. The
Company considers its facilities suitable and adequate for the purposes for
which they are used.

         Each of the Company's travel centers is a full service facility located
on or near an interstate highway and identified with TA, Unocal 76 or Burns
Bros. Travel Stops signage. As part of the Combination Plan, the National travel
centers that have joined the Network have been rebranded under the TA trademark
and the Burns Network sites will be substantially rebranded during 1999. All
fuel and nonfuel products and services are generally available 24 hours per day
and 365 days per year.

         Property. The layout of the Company-owned travel centers vary from site
to site. Generally, the Company-owned facilities are located on properties
averaging 22 acres, of which an average of approximately 19 acres are developed.
The majority of the developed acres contain the main building, housing one or
more restaurants, a travel and convenience store and driver amenities, a truck
maintenance and repair shop, separate truck and car fuel islands, separate truck
and car paved parking and, in some cases, motels. The remaining developed acres
contain landscaping and access roads.

         Fuel Islands. Company sites have diesel fuel islands that accommodate
ten pumps on average, most of which are dual fill pumps that can fill each of a
typical truck's two tanks simultaneously. In addition, travel centers generally
have a gasoline island which can accommodate four to eight automobiles
simultaneously. Certain locations also have one and sometimes two additional
convenience stores located at the fuel islands.

         Truck Maintenance and Repair Shop. Other than at the Burns Network
sites, virtually all of the Company's travel centers have truck maintenance and
repair shops which operate 24 hours per day and 365 days per year. Currently,
only two Burns Network sites include truck maintenance and repair shops. The
typical travel center repair shop has between two and four service bays, a parts
storage room and fully trained mechanics on duty at all times. These shops offer
extensive maintenance and emergency repair and road services, from basic
services such as oil changes and tire repair to specialty services such as
diagnostics and repair of air conditioning, air brake and electrical systems.

         Main Building. The main building at each travel center contains a full
service restaurant and, in many instances, one or more QSRs; a travel and
convenience store; a fuel desk; driver amenity areas, including a lounge,
television room, private showers and laundry; and ATM machines, as well as
office space and training rooms for the employees of the travel center. As part
of the Capital Program, the Company has allocated funds to expand the main
building floor space for a majority of the former National Network sites that
have been converted to the Network in order to create adequate space within the
main building to implement the Company's fast food program or to increase the
size of the travel centers' store or gaming and vending areas.

         Full Service and Fast Food Restaurants. All Company travel centers have
full service restaurants that offer seating for an average of approximately 140
customers. The TA Network has associated its full service restaurants with the
Company-owned "Country Pride" and "Mrs. B's" brand names. The Company has also
promoted the installation of nationally branded fast food restaurants, such as
Burger King, Dairy Queen, Dunkin' Donuts, Kentucky Fried Chicken, Little
Caesar's, Long John Silver's, McDonald's, Pizza Hut, Sbarro, Subway, Taco Bell
and Wendy's at its travel centers. The Company generally attempts to locate QSR
offerings within the main travel center building (as opposed to constructing
stand-alone buildings). As of December 31, 1998, 56 of the 133 Company-owned
travel centers offered at least one nationally branded QSR.


                                       10
<PAGE>   12

         Travel and Convenience Store. Each travel center has a travel and
convenience store that caters to truck drivers, motorists, recreational vehicle
and bus customers. The travel and convenience stores sell food and snack items,
beverages, non-prescription drug and beauty aids, batteries, automobile
accessories, music and audio products. In addition to complete convenience store
offerings, the travel and convenience stores also sell items specifically
designed for the truck driver's on-the-road lifestyle, including laundry
supplies and clothing as well as truck accessories. The typical Company-owned
store averages approximately 1,700 square feet.

         Motels. Fourteen of TA's travel centers currently have Company-owned
motels, with an average capacity of 38 rooms. Twelve of these motels are
operated under franchise grants from nationally branded motel chains, including
DayStop, HoJo Inn, Super 8 and Travelodge. The remaining two motels are TA and
Burns branded motels. TA currently remits royalty and advertising fees to its
motel franchisors at rates ranging from 3% to 8% of gross revenues.

         Additional Services. Most TA travel centers provide professional
drivers with access to specialized business services, including an information
center where drivers can send and receive faxes, overnight mail and other
communications, and a banking desk where drivers can cash checks and receive
funds transfers from fleet operators. Most sites have installed telephone rooms
with 20 to 25 pay telephones with AT&T long distance service. To meet the
personal needs of truck drivers, the typical travel center has designated "truck
driver only" areas, including a television room with a VCR and comfortable
seating for drivers, a barber shop, a laundry area with washers and dryers, 6 to
12 private showers and dressing rooms. Travel centers located in Louisiana,
Nevada and Oregon also feature gaming operations. All travel centers have truck
scales.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of its business. The Company is not now
involved in any litigation, individually, or in the aggregate, which could have
a material adverse effect on the Company's business, financial condition,
results of operations or cash flows. The following describes the current status
of the pending matter previously disclosed.

         Forty-Niner Truck Plaza Litigation. This action was commenced in
California Superior Court, Sacramento County, on January 28, 1993 by four then
Operators of National Leased Sites in California. The complaint asserts claims
on behalf of each of the plaintiffs against the Company, Clipper and Unocal
based upon alleged violations by Unocal of the California Business and
Professions Code and of an alleged contract by failing to provide the plaintiffs
with a bona fide offer or right of first refusal to purchase their truckstops in
connection with the sale of the plaintiffs' truckstops by Unocal to the Company.
Two of the plaintiffs settled their claims prior to commencement of the first
trial, which ended with a court order for a retrial. On September 1, 1998, one
of the two remaining plaintiffs entered into a settlement agreement with Unocal
and the Company and dismissed its claims in the case. The retrial of this case
with the one remaining plaintiff commenced on February 16, 1999. On March 8,
1999, the trial was suspended upon the request of all parties in order to
complete negotiation of a definitive settlement agreement, the general terms of
which have been agreed to by all parties. Although the Company believes that the
proposed settlement would not have a material adverse effect on its consolidated
financial statements, there can be no assurance that the proposed settlement
will be implemented, if at all, on terms satisfactory to the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of 1998.




                                       11
<PAGE>   13



                                     PART II

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

         (a)      Market information. The outstanding shares of Common Stock of
                  the registrant were issued in transactions not involving a
                  public offering. As a result, there is no public market for
                  the registrant's Common Stock.

         (b)      Holders. As of March 15, 1999, the outstanding shares of
                  Common Stock were held of record by 48 stockholders, of which
                  26 stockholders have their shares included in a voting trust
                  (see Item 13-"Certain Relationships and Related
                  Transactions").

         (c)      Dividends. The registrant's senior indebtedness prohibits,
                  except in very limited circumstances, the payment of cash
                  dividends on, and sets limits on redemptions and repurchases
                  of, the registrant's Common Stock. In addition, the indenture
                  to which the registrant is a party prohibits, prior to April
                  1, 2007, the payment of cash dividends on, and sets limits on
                  redemptions and repurchases of, the registrant's Common Stock.
                  The registrant has not paid any cash dividends to holders of
                  Common Stock and does not expect to declare or pay cash
                  dividends to holders of Common Stock in the foreseeable
                  future.




                                       12
<PAGE>   14


ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth selected historical financial data for
the Company. Such data presents the Company's investment in TA as net assets of
subsidiary held for disposition until September 30, 1996. Accordingly, given the
Company's decision to retain TA and pursue the Combination Plan, such data
should be read in conjunction with "Management's Discussion and Analysis" and
the audited financial statements of the Company included elsewhere in this
Report in order to view what the Company's results would have been had TA been
fully consolidated in 1996. The results of operations and other financial and
operating data of the 17 sites acquired in the Burns Acquisition are included in
the Company's consolidated financial statements beginning on December 4, 1998.

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                ---------------------------------------------------------------------

                                                   1998          1997          1996(1)        1995(1)        1994(1)
                                                ---------    -----------      ---------      ---------      ---------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>          <C>              <C>            <C>            <C>      
INCOME STATEMENT DATA(2):
   Revenues:
       Fuel ................................    $ 554,735    $   708,637      $ 550,212      $ 376,148      $ 396,748
       Nonfuel .............................      347,531        293,843         99,991         27,948         18,887
       Rent and royalties ..................       21,544         36,848         46,055         51,801         51,740
                                                ---------    -----------      ---------      ---------      ---------
          Total revenues ...................    $ 923,810    $ 1,039,328      $ 696,258      $ 455,897      $ 467,375
   Gross profit (excluding depreciation) ...    $ 296,661    $   266,244      $ 127,564      $  79,074      $  76,227
   Income from operations ..................    $  19,093    $    22,345      $  24,118      $  29,884      $  29,496
   Extraordinary loss ......................    $  (3,905)   $    (5,554)     $       -      $       -      $       -
   Net income (loss) .......................    $  (8,082)   $    (5,763)     $   5,533      $   9,926      $   9,692
   Income (loss) before extraordinary item                                                                 
     per common share:                                                                                     
          Basic ............................    $  (21.12)   $     (7.56)     $  (0.81)      $    3.04      $    3.43
          Diluted ..........................    $  (21.12)   $     (7.56)     $  (0.81)      $    0.57      $    0.64
BALANCE SHEET DATA (END OF PERIOD):                                                                        
   Total assets ............................    $ 610,061    $   507,792      $ 425,889      $ 297,231      $ 294,961
   Total debt (net of unamortized discount).    $ 392,459    $   290,125      $ 224,435      $ 139,991      $ 153,938
    Mandatorily redeemable preferred                                                                       
       stock(3) ............................    $  69,974    $    61,404      $  53,885      $  47,286      $  41,495
   Working capital .........................    $  99,568    $    86,103      $  23,766      $   9,872      $  18,421
OTHER FINANCIAL AND OPERATING DATA:                                                                        
   Total diesel fuel sold (in thousands of                                                                 
       gallons) ............................      973,812        975,495        713,754        641,901        663,777
   Capital expenditures, excluding 
       acquisitions of network assets ......    $  65,704    $    60,818      $  20,545      $  19,930      $  10,993
   EBITDA(4) ...............................    $  68,708    $    63,553      $  60,940      $  63,198      $  69,047
   Cash flows (used in) provided by:                                                                       
       Operating activities ................    $  48,521    $    41,670      $  27,620      $  19,436      $  26,357
       Investing activities ................    $(125,505)   $   (37,987)     $ (22,254)     $ (17,601)     $ (10,993)
       Financing activities ................    $  94,428    $    44,294      $  15,222      $ (14,141)     $  (3,446)
   Ratio of EBITDA to interest expense,                                                                    
       net(5) ..............................         2.71           2.78           2.82           2.95           3.12
NUMBER OF SITES (END OF PERIOD)(6):                                                                        
   Company-operated Sites ..................          103             83             58             46             39
   Leased Sites ............................           30             35             77             89             96
   Franchisee-Owner Sites ..................           10              9             35             38             41
                                                ---------    -----------      ---------      ---------      ---------
       Total Sites .........................          143            127            170            173            176
                                                =========    ===========      =========      =========      =========
</TABLE>




                                       13
<PAGE>   15


Notes to Selected Financial Data

(1)   For the period from January 1, 1994 to September 30, 1996, the Company's
      investment in TA was presented as net assets of subsidiary held for
      disposition and TA's results of operations were excluded from the
      Company's consolidated results of operations until December 31, 1994 and
      subsequently included therein as a single amount in the Company's
      consolidated income statement through September 30, 1996. Effective
      September 30, 1996, the decision was made to retain TA and, subsequently,
      the Company chose to pursue the Combination Plan. Accordingly, at such
      time TA was no longer carried as net assets of subsidiary held for
      disposition. At that date, the carrying value of the Company's investment
      in TA of $44.6 million was allocated to the identifiable assets and
      liabilities and was based on the estimated current fair values at that
      date. In addition, the results of operations and cash flows of TA are
      included in the consolidated results of operations and cash flows of the
      Company from October 1, 1996.

(2)   The company completed the Burns Acquisition effective December 4, 1998.
      The results of operations and cash flows from the 17 sites acquired in the
      Burns Acquisition are included beginning on that date.

(3)   "Mandatorily redeemable preferred stock" is comprised of two series of
      convertible preferred stock which accumulate dividends semi-annually at a
      compound annual rate of 13.5%. Both series are mandatorily redeemable in
      2008 and are held by certain members of the Investor Group.

(4)   "EBITDA" is defined herein as income from operations plus the sum of
      depreciation, amortization, transition expense, gains and losses on sales
      of property and equipment, and other noncash charges, and is presented
      because it is commonly used by certain investors and analysts to analyze
      and compare operating performance, and to determine a company's ability to
      service and incur debt. EBITDA should not be considered in isolation from,
      or a substitute for, net income, cash flows from operating activities or
      other consolidated income or cash flow statement data prepared in
      accordance with generally accepted accounting principles or as a measure
      of profitability or liquidity. The EBITDA amounts herein present the
      Company's results as though TA had not been accounted for as a subsidiary
      held for disposition and had, instead, been fully consolidated (see Note 1
      above).

(5)   The ratio of EBITDA to interest expense, net set forth is different than
      the Consolidated Coverage Ratio (as defined in the indenture related to
      the Company's 10 1/4% Senior Subordinated Notes due 2007). The
      Consolidated Coverage Ratios for the years ended December 31, 1998 and
      1997 were 2.21 and 2.08, respectively.

(6)   The number of sites data shown for all years reflects the total number of
      Company sites, regardless of the brand names under which they are
      operating.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the audited
financial statements.

OVERVIEW

         The Company is a holding company which, through its wholly-owned
subsidiaries, owns, operates and franchises more travel centers in the United
States than any of its competitors with 143 network sites nationwide, including
133 Company-owned locations. The Company currently operates or franchises a
network of 124 travel centers in 36 states under the "TravelCenters of America"
or "TA" and related brand names, a network of 17 sites in 9 states under the
"Burns Bros. Travel Stops" and related brand names, and two travel centers in
two states under the licensed "Unocal 76" and related brand names.


                                       14
<PAGE>   16


         The Company was formed in December 1992 to facilitate the National
Acquisition in April 1993. In December 1993, the Company acquired the TA
Network. In December 1998, the Company acquired the Burns Network. In connection
with the TA Acquisition, the Investor Group and certain members of TA's
management granted an option to the Company whereby the Company could repurchase
its equity held by such Investor Group and management members in exchange for
consideration consisting of cash and all of the equity of TA (the "Repurchase").
If the Repurchase had been consummated, the Company and the National Network
would have been owned by the Operator and Franchisee-Owner stockholders of the
Company and certain members of National's management, and TA would have been
owned by the Investor Group and certain members of TA's management. During the
nine months ended September 30, 1996, TA and National were separately managed
and financed and in the Company's consolidated financial statements TA was
presented as net assets of subsidiary held for disposition and TA's results of
operations were included in the Company's consolidated financial statements as a
single amount. Effective September 30, 1996, the decision was made to retain TA,
and, subsequently, the Company chose to pursue the combination of the TA and
National networks. (See "-Combination Plan" below.) After September 30, 1996, TA
was no longer carried as net assets of subsidiary held for disposition and TA's
results of operations were consolidated with the Company's.

         Historically, under the Company's ownership, National operated
principally as a fuel wholesaler and franchisor, with relatively few
Company-Operated sites. As a result, its revenues consisted primarily of
wholesale diesel fuel sales to Operators and Franchisee-Owners, rent from
Operators of Leased Sites and nonfuel franchise royalty payments. In contrast,
TA operated principally as an owner-operator of travel centers. Consequently,
while TA derived the majority of its revenues from retail diesel fuel sales, the
majority of its gross profit has been derived from, and its principal strategic
focus has been, the sale of higher margin nonfuel products and services.

COMBINATION PLAN

         There are three primary elements to the Combination Plan that was
adopted in January 1997 and has been executed by the Company throughout 1997 and
1998: (1) integrating the management of the TA and National Networks, (2)
converting the Existing Network sites to one Network, and (3) rationalizing and
further developing the Company's Network. As a result of implementing the
Combination Plan, for the years ended December 31, 1998 and 1997, the Company
incurred approximately $3.6 million and $15.2 million, respectively, of expense,
included in refinancing, transition and development costs in the Company's
consolidated financial statements. These expenses relate to, among other things,
(i) employee separations, (ii) the costs to convert National Network travel
centers to Network travel centers, (iii) the costs to dispose of travel centers
or terminate lease or franchise agreements, and (iv) the costs of integrating
the management and operations of the Existing Networks into the Network,
including relocation, travel, training, and legal expenses. Transition expenses
related to the Combination Plan are expected to aggregate approximately $20
million, with the remainder of the expenses to be incurred over the next two
years. In addition, the Company expects to incur approximately $2.0 million of
transition expenses as a result of the Burns Acquisition and expects to incur
further transition expenses if the TPOA Acquisition is ultimately consummated.

Integrating Management of the Existing Networks

         As part of the Combination Plan, the Company's headquarters was moved
from the National headquarters in Nashville, TN to the TA headquarters in
Westlake, OH and management of the Existing Networks was centralized under the
TA management team. Offers of employment in Westlake were made to several
National corporate-level employees, but most opted to remain in Nashville and,
accordingly, most of National's corporate-level employees were terminated. In
January 1997, certain of National's executive officers resigned and related
severance costs of $0.8 million were recognized. In May 1997, management
finalized its plans regarding employee terminations and, accordingly, the
related costs of $1.8 million were recognized. Termination benefits of
approximately $2.0 million and $0.6 million were paid to the 111 terminated
National employees in the years ended December 31, 1997 and 1998, respectively.
All such payments were made by March 31, 1998.


                                       15
<PAGE>   17


Rationalizing and Developing the Network

         At the time the Combination Plan was approved, there were 122 sites
operating in the National Network (19 Company-operated Sites, 76 Leased Sites
and 27 Franchisee-Owner Sites) and 48 sites operating in the TA Network (40
Company-operated Sites and eight Franchisee-Owner Sites). As a result of their
history as competitors, there were markets in which each of the Existing
Networks had a site. Certain markets can support such coverage, but others
cannot, so the Company reviewed its networks in order to rationalize the total
number of sites and reduce oversaturation in certain markets. As a result, the
Company identified up to 23 National Network Company-owned sites to be sold and
a minimum of 23 National Network Franchisee-Owner Sites to be terminated.

         During 1997, 15 National Network Leased Sites were sold to the
operators of those sites for a net gain on sale of $11.9 million and all 27 of
the National Network Franchisee-Owner Sites were terminated. In 1998, two
Company-operated Sites were sold for a net gain on sale of $0.7 million. At
December 31, 1998, two closed sites were being held for sale. The net carrying
value of these two sites at December 31, 1998 is $2.0 million and the Company
expects them to be sold for a gain.

         In addition to the sites held for sale, the Company may sell other
operating sites. As the Company acquires additional sites, such as in the Burns
and TPOA Acquisitions, new market overlaps are created, thus providing the
opportunity to sell sites if buyers offering sufficient amounts can be
identified. Further, the Company's agreements with its franchises provide the
franchisees with limited protected territories in which the Company may not
operate TA branded facilities. In such cases, sales of sites within those
territories may become necessary or economically attractive.

         In addition to the site sales and terminations, the Combination Plan,
as well as the Company's strategic plan, contemplates further development and
expansion of the Network into key markets in which the Network is not adequately
represented, which involves constructing or acquiring new sites as well as
improving existing sites. Pursuant to the Capital Program, as adjusted for the
Burns Acquisition, a significant amount of the capital expenditures planned for
1999 through 2002 are for improvements at existing sites such as reimaging,
rebranding, constructing new QSRs, expanding the travel stores and convenience
stores, expanding existing and constructing additional shop bays, and rebranding
and upgrading the gasoline islands. Further, through both capital expenditures
and leasing, the Company is expecting to open five newly built travel centers in
1999 through 2001.

Converting the Existing Networks into One Network

         As described above, there were 122 sites in the National Network at the
outset of the Combination Plan and a key component of the Combination Plan is to
integrate the Existing Networks into one. This task was partially completed by
the sales of 17 Leased Sites and the termination of 27 Franchisee-Owner sites
during 1997 and 1998. A second step was the conversion of all National Network
Company-operated Sites to TA Network Sites. This conversion involved significant
costs for activities such as hiring and training employees at the sites,
installing TA's store, shop and accounting systems and programs, implement TA
management, marketing, operations, safety and training programs, relocating site
management employees and rebranding the sites as TA sites. The remaining step
was conversion of the Leased Sites, which has been accomplished in two ways:
acquiring the leasehold interests of the Operators at 30 Leased Sites (four in
1998 and 26 in 1997) and negotiating Network Agreements with the Operators at 29
Leased Sites (one in 1998 and 28 in 1997). One Operator of a Leased Site who had
signed the Network Agreements sold his leasehold interest to the Company during
1998. As a result of the above, at December 31, 1998, there remained only two
sites operating under the National Agreements.



                                       16
<PAGE>   18



         The process of converting Leased Sites from the National Agreements to
the Network Agreements includes rebranding of the travel centers, installation
of TA's store and shop programs, training of the franchisees in TA's operating
procedures and revisions to the franchise and lease agreements that reduce the
fixed rent payable by the Operators (calculated as a percentage of nonfuel
revenues and a rate per gallon of fuel sold). Converting to the Network
Agreements has resulted in reduced revenue in the short term, but the Company
believes that, in the long term, total revenue will be increased as a result of
increased franchisee nonfuel revenues.

         The following table sets forth the number and type of ownership and
management of the travel centers operating in the Company's networks.

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                  -----------------------------
                                                        1998          1997
                                                  -----------------------------

<S>                                                       <C>           <C>
Company-owned and operated sites(1)                       103            83
Company-owned and leased sites                             30            35
                                                     --------      --------
     Company-owned sites                                  133           118
Franchisee-owner sites                                     10             9
                                                     --------      --------
     Total                                                143           127
                                                     ========      ========
Stand-alone shops                                           -             2
                                                     ========      ========
</TABLE>

(1)  Excludes two closed sites in both 1998 and 1997.

TPOA ACQUISITION

         On February 26, 1999, the Company entered into a merger agreement
pursuant to which the Company intends to acquire 100% of the voting stock of
TPOA at a price of $4.30 per share. Under the terms of the merger agreement and
certain ancillary agreements, the Company will pay cash of approximately $40.5
million for all of TPOA's common shares except approximately 653,000 common
shares, held by TPOA's chairman and chief executive officer, that will be
exchanged for approximately 85,000 shares of the Company's common stock. In
addition, the Company expects to pay cash of approximately $15 million to $20
million to retire substantially all of TPOA's indebtedness expected to be
outstanding at the merger date and to pay various costs of the transaction. TPOA
operates a network of 16 travel centers in seven states, primarily in the
northeastern U.S. This acquisition, if ultimately consummated, is expected to
close in June 1999. A closing of the merger is subject to a variety of
conditions, including approval by TPOA's shareholders.




                                       17
<PAGE>   19


RESULTS OF OPERATIONS

         The following discussions and analyses of Results of Operations and of
Liquidity and Capital Resources present detail on the Company's combined
results, which differ from the Company's consolidated results reflected in the
audited financial statements for the year ended December 31, 1996, as a result
of the presentation in the consolidated statements of TA as assets of subsidiary
held for disposition during a portion of that year. The following table and the
1996 amounts discussed in the Results of Operations and Liquidity and Capital
Resources sections present the Company's consolidated amounts for 1996 as though
TA had not been held for disposition and had instead been fully consolidated.
The results of operations of the 17 sites acquired in the Burns Acquisition are
included in the following beginning December 4, 1998, the date of the Burns
Acquisition.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------
                                                                     1998           1997            1996
                                                                ------------------------------ ---------------
                                                                          (IN MILLIONS OF DOLLARS)
<S>                                                                <C>            <C>             <C>     
Revenues:
     Fuel.......................................................   $  554.7       $  708.6        $  752.2
     Nonfuel....................................................      347.5          293.8           236.8
     Rent and royalties.........................................       21.5           36.8            47.4
                                                                   --------       --------        --------
     Total revenues.............................................      923.8        1,039.3         1,036.4
Cost of revenues (excluding depreciation).......................      627.1          773.1           803.5
                                                                   --------       --------        --------
Gross profit (excluding depreciation)...........................      296.7          266.2           232.9
Operating expenses..............................................      195.8          168.3           129.4
Selling, general and administrative expenses....................       34.3           35.6            42.8
Refinancing, transition and development costs...................        3.6           15.2             2.7
Depreciation and amortization...................................       44.7           35.8            27.0
(Gain) loss on sales of property and equipment..................       (1.2)         (11.2)            1.5
Stock compensation expense......................................        2.5            1.4             0.7
Other operating (income) expense, net...........................       (2.1)          (1.2)           (0.9)
                                                                   --------       --------        --------
Income (loss) from operations...................................       19.1           22.3            29.7
Interest (expense), net.........................................      (25.4)         (22.9)          (20.8)
                                                                   --------       --------        --------
Income (loss) before income taxes and extraordinary item........       (6.3)          (0.6)            8.9
Provision (benefit) for income taxes............................       (2.1)          (0.3)            3.4
                                                                   --------       --------        --------
Income (loss) before extraordinary item.........................       (4.2)          (0.3)            5.5
Extraordinary item (net of taxes)...............................       (3.9)          (5.5)              -
                                                                   --------       --------        --------
Net (loss) income...............................................   $   (8.1)      $   (5.8)       $    5.5
                                                                   ========       ========        ========
EBITDA(1).......................................................   $   68.7       $   63.6        $   60.9
                                                                   ========       ========        ========
</TABLE>

(1)  "EBITDA" is defined as set forth in Note 4 to Selected Financial Data in
     Item 6.

1998 COMPARED TO 1997

Revenues

         The Company's consolidated revenues for 1998 were $923.8 million, which
represents a decrease from the prior year of $115.5 million, or 11.1%.



                                       18
<PAGE>   20



         Fuel revenue for 1998 reflects a decrease from 1997 of $153.9, or
21.7%. The decrease resulted from an approximately 21.9% decrease in average
retail prices and a decrease of 1.7 million gallons sold (0.2%). The decrease in
average retail prices primarily results from decreased crude oil prices and also
from competitive pressures. The slight volume decrease is the net of increases
in volumes at sites in operation in both 1997 and 1998 of 10.3%, offset by
reductions for sites sold in 1997.

         Nonfuel revenue in 1998 increased 18.3% from 1997 primarily as a result
of an increased number of Company-operated Sites offering nonfuel products and
services. There were 27 Leased Sites converted to Company-operated Sites
throughout 1997, resulting in a full year of operations for these sites in 1998.
An additional five Leased Sites were converted to Company-operated Sites during
1998. Further, on a same-site basis, nonfuel revenue increased 5.8% in 1998
versus 1997.

         Rent and royalty revenue for 1998 decreased $15.3 million as a result
of (i) conversions of Leased Sites to Company-operated Sites, (ii) sales of
Leased Sites and (iii) the rent reductions that became effective when former
National franchisees signed Network Agreements with the Company. These changes
occurred primarily throughout 1997, and the decreases in 1998 reflect the full
year effects of these changes. The new franchise and lease agreements provide
for reduced fixed rents but increased franchise royalty rates to be applied to
nonfuel revenues generated by the franchisees' operations. On a same-site basis,
rent revenue for 1998 reflects a decrease of $1.8 million, or 11.6%, from 1997,
while royalty revenue for 1998 reflects an increase of $2.2 million, or 55.3%,
over 1997.

Gross Profit

         The Company's gross profit for 1998 was $296.7 million, compared to
$266.2 million for 1997, an increase of $30.5 million, or 11.5%. The increase in
the Company's gross profit was primarily due to increases in nonfuel revenues,
diesel fuel margins, and royalty revenue, partially offset by decreased rent
revenue as discussed above.

Operating, and Selling, General and Administrative Expenses

         Operating expenses include the direct expenses of Company-operated
Sites and selling, general and administrative expenses ("SG&A") include
corporate overhead and administrative costs.

         The Company's operating expenses increased by $27.4 million, or 16.3%,
to $195.8 million for 1998, as compared to 1997. The increase reflects a full
year of operations for the 27 Leased Sites that were converted to
Company-operated Sites during 1997, as well as increases from the five Leased
Sites converted to Company-operated Sites during 1998. In addition, the growth
in nonfuel revenue requires an increase in operating expenses, particularly
labor, to support the revenue growth.

         The Company's SG&A decreased 3.7% from $35.6 million in 1997 to $34.3
million in 1998 as a result of continued synergy savings as a result of the
Combination Plan.

Refinancing, Transition and Development Costs

         Refinancing, transition and development costs for 1998 decreased from
$15.2 million in 1997 to $3.6 million in 1998. The 1998 costs were incurred in
continuing to effect the combination of National and TA, as well as expenses
incurred in beginning the combination of the Burns Network into the Network. The
decrease from 1997 reflects the relative level of effort in 1998 versus 1997 on
transition activities at the former National Network sites.




                                       19
<PAGE>   21


Depreciation and Amortization

         Depreciation and amortization of $44.7 million for 1998 increased $8.9
million from 1997. During the first quarter of 1998, the useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years to conform National's estimated useful lives to those of TA. The effect of
this change in estimate resulted in reductions in income before extraordinary
items, net income and earnings per share of $9.5 million, $5.7 million and $9.08
per share, respectively. In addition, an impairment charge of $0.6 million
recorded in the 1997 fourth quarter with respect to certain sites being held for
sale was completely reversed in the 1998 second quarter. This reversal was based
on increases in the estimated sales prices of the respective sites. In 1997,
impairment charges related to goodwill and certain sites being held for sale of
approximately $7.5 million were included in depreciation and amortization.
Exclusive of the above amounts, depreciation and amortization increased
approximately $8.1 million between years, primarily due to the significant level
of capital expenditures in 1998 and 1997.

Income From Operations

         Income from operations for the Company was $19.1 million for 1998 as
compared to $22.3 million in 1997, which is a decrease of $3.2 million, or
14.3%. The decrease is attributable to the increase in depreciation and
amortization and operating expenses and the decrease in gains on sales or
property and equipment and rent and royalty revenues, partially offset by
increased nonfuel sales margins, increased diesel margins and headquarters
synergies. EBITDA for the Company for 1998 was $68.7 million, compared to $63.6
million for 1997. The increased EBITDA for 1998 is largely derived from
increased gross profit as a result of a greater number of Company-operated Sites
and increased diesel margins, partially offset by the increased operating
expenses incurred by the increased revenue levels and reductions in rent and
royalty revenues.

Interest (Expense), net

         Interest expense for 1998 was $25.4 million, $2.5 million higher than
1997. This is a result of the increased net debt balance after completing the
1998 Refinancing and a full year of interest expense on the increased net debt
balance from the 1997 Refinancing (both as discussed in Liquidity and Capital
Resources below).

Other Items

         The extraordinary loss of $3.9 million results from the 1998
Refinancing and represents the write-offs of the then remaining unamortized
balance of deferred financing costs related to the extinguished indebtedness
($5.9 million) and approximately $15.8 thousand of break funding fees paid to
holders of redeemed senior notes. The reported amount of the extraordinary loss
is net of the applicable income tax benefit of $2.0 million.

1997 COMPARED TO 1996

Revenues

         The Company's consolidated revenues for 1997 were $1,039.3 million,
which represents an increase over the prior year of $2.9 million.

         Fuel revenue for 1997 reflects a decrease from 1996 of $43.6 million,
or 5.8%. The decrease resulted from an approximately 5.4% decrease in average
retail diesel prices, partially offset by an increase in diesel gallons sold of
7.7 million gallons (0.8%). The decrease in average retail prices is a result of
petroleum industry conditions and competitive pressures. The slight volume
increase stems from the success of fleet marketing efforts, including the
effects of the Pathway Program (a diesel fuel hedging program offered to fleets
in conjunction with Simons Petroleum, Inc.).


                                       20
<PAGE>   22

         Nonfuel revenue in 1997 has increased 24.1% over 1996, primarily due to
the increased number of Company-operated Sites offering nonfuel products and
services: from December 31, 1996 through December 31, 1997, 27 Leased Sites were
converted to Company-operated Sites. In addition, a new TA site was opened in
September 1996, and two stand-alone TA shops were opened in mid-1996. The
stand-alone shops were located at Burns sites that are now owned by the Company.

         Rent and royalty revenue for 1997 decreased 22.4% from 1996 as a result
of (i) conversions of Leased Sites to Company-operated Sites, (ii) sales of
Leased Sites and (iii) the rent reductions that became effective when former
National franchisees signed new franchise and lease agreements with the Company.
Rent revenue is expected to continue to decline in 1998, reflecting the full
year effects of the 1997 activity. The new franchise and lease agreements
provide for reduced fixed rents but increased franchise royalty rates to be
applied to nonfuel revenues generated by the franchisees' operations. New
franchise and lease agreements were signed by 29 Operators during 1997.

Gross Profit

         The Company's gross profit for 1997 was $266.2 million, compared to
$232.9 million for 1996, an increase of $33.3 million, or 14.3%. The increase in
the Company's gross profit was primarily due to increases in nonfuel revenues
and diesel fuel margins, partially offset by decreased rent and royalty revenue,
resulting from the conversions of travel centers from Leased Sites to
Company-operated Sites, sales of Leased Sites and terminations of
Franchisee-Owner Sites during 1997.

Operating and Selling, General and Administrative Expenses

         Operating expenses include the direct expenses of Company-operated
Sites and selling, general and administrative expenses ("SG&A") include
corporate overhead and administrative costs.

         The Company's operating expenses increased by $38.9 million, or 30.1%,
to $168.3 million for 1997, as compared to 1996. The increase reflects the
increased number of Company-operated Sites during 1997 as a result of the 1996
addition of three newly built TA sites (including the two stand-alone shops) and
the conversion of 27 Leased Sites to Company-operated Sites during 1997.

         The Company's SG&A decreased from $42.8 million in 1996 to $35.6
million in 1997, a 16.8% decrease, primarily as a result of personnel reductions
at National pursuant to the Combination Plan, partially offset by increased
staffing in the operational support and business development areas at TA, as
well as decreased occupancy and other expenses stemming from the Combination
Plan.

Refinancing, Transition and Development Costs

         Refinancing, transition and development costs for 1997 increased from
$2.7 million for 1996 to $15.2 million. The 1997 costs were incurred in
effecting the combination of National and TA, including recognition of employee
termination benefits of $2.6 million, while the 1996 amount is comprised of $1.4
million of expenses incurred in a failed refinancing attempt by National and
$1.3 million incurred at TA in connection with an attempted acquisition and the
design of the travel center prototype.

Depreciation and Amortization

         Depreciation and amortization of $35.8 million for 1997 increased by
$8.8 million from 1996. This increase was mainly due to impairment charges of
approximately $7.5 million included in 1997 depreciation and amortization
expense and the effects of the capital expenditures made during 1996 and 1997,
as well as the increased amortization of deferred financing costs stemming from
the 1997 Refinancing.


                                       21
<PAGE>   23

Income from Operations

         Income from operations for the Company for 1997 was $22.3 million as
compared to $29.7 million in 1996, a decrease of $7.4 million or 24.9%. The
decrease is attributable to the transition expenses and impairment charges
incurred in 1997, as well as the effect of decreased rent revenue and increased
operating costs resulting from the conversions of Leased Sites to
Company-operated Sites, partially offset by increased nonfuel sales margins as a
result of the site conversions, gains from the sales of Leased Sites and
headquarters synergies, all of which is due to the execution of the Combination
Plan throughout 1997. EBITDA for the Company for 1997 was $63.6 million, as
compared to $60.9 million for 1996. The increased EBITDA in 1997 is largely
derived from increased gross profit as a result of a greater number of
Company-operated Sites and synergies realized in SG&A expense, partially offset
by reduced rent revenue, primarily as a result of the Combination Plan.

Interest (expense), net

         Interest expense for 1997 was $22.9 million, $2.1 million higher than
for 1996 as a result of the increased net debt balance after consummation of the
1997 Refinancing (discussed in Liquidity and Capital Resources below) on March
27, 1997.

Other Items

         The extraordinary loss of $5.5 million in 1997 results from the
refinancing of the Company's indebtedness on March 27, 1997 and represents the
write-off of the then remaining unamortized balances of deferred financing costs
($7.8 million) and debt discount ($1.3 million) related to the prior
indebtedness. The reported amount of the extraordinary loss is net of the
applicable income tax benefit of $3.6 million

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash requirements consist principally of working capital
needs, payments of principal and interest on outstanding indebtedness and
capital expenditures, including expenditures for acquisitions, expansion and
environmental upgrades and compliance.

         Net cash provided by operating activities totaled $48.5 million in
1998, $41.7 million in 1997 and $27.6 million in 1996. The increase in net cash
flows provided by operating activities in 1998 versus 1997 is primarily
attributable to increased EBITDA partially offset by growth in working capital
requirements primarily resulting from the increased number of Company-operated
sites and increased interest expense as a result of the 1998 Refinancing. The
increase in net cash flows provided by operating activities in 1997 compared to
1996 was primarily due to increased EBITDA in 1997, as discussed previously,
partially offset by growth in working capital requirements as a result of the
increased number of Company-operated Sites and increased interest expense as a
result of the 1997 Refinancing.

         Net cash used in investing activities for 1998 was $125.5 million
versus $38.0 million in 1997 and $22.3 million in 1996. The amount of net cash
used in investing activities in 1998 reflects $65.7 million of capital
expenditures in accordance with the Capital Program and consistent with 1997, as
well as $6.4 million for the conversions of five leased sites to
Company-operated Sites and approximately $56.8 million for the Burns
Acquisition. These uses of cash are partially offset by $3.4 million of proceeds
from sales of property and equipment comprised primarily of the sales of two
Company-operated sites and condemnation proceeds related to a third
Company-operated Site. The amount for 1997 reflects a $53.0 million increase in
expenditures related to capital additions and conversions of Leased Sites to
Company-operated Sites, as contemplated by the Capital Program, partially offset
by a $37.3 million increase in proceeds from sales of property and equipment
primarily resulting from the sales of 15 Leased Sites to the respective
Operators.



                                       22
<PAGE>   24



         Net cash flows provided by financing activities were $94.4 million in
1998, $44.3 million in 1997 and $15.2 million in 1996. The increased cash flows
from investing activities in 1998 versus 1997 reflects the 1998 Refinancing. The
change in the amount of financing activity cash flows in 1997 from 1996 was due
to the Company's 1997 Refinancing and recapitalization. Required debt repayments
for the next five years are significantly lower than they would have been in the
absence of the 1997 Refinancing.

         In order to provide for its growth, the Company, among other things,
has completed refinancings in each of 1998 and 1997. In the 1997 Refinancing,
completed on March 27, 1997, the Company repaid or exchanged all of its
previously existing indebtedness and issued $125 million principal amount of
Senior Subordinated Notes, $85.5 million principal amount of Senior Secured
Notes ($35.5 million of fixed-rate Series I and $50.0 million of floating-rate
Series II), and an $80 million term loan facility which was fully borrowed. The
Company also has a $40.0 million revolving credit facility, which, except for
$1.5 million used for letters of credit, had not been drawn upon through
December 31, 1998. In the 1998 Refinancing, completed on December 3, 1998, the
Company increased the term loan facility, and its borrowings under the facility,
by $150.0 million. The proceeds of the borrowing were used to redeem the Series
II Senior Secured Notes ($50.0 million), fund the Burns Acquisition
(approximately $56.8 million), and prefund $42.0 million of planned capital
expenditures and business acquisitions, with the remainder used for costs of the
1998 Refinancing and accrued interest. The $42.0 million for prefunded capital
expenditure and business acquisitions was required to be maintained in a cash
collateral account and to be used only for such expenditures. Provisions of the
debt agreements require the Company to use $30.0 million of the cash collateral
account balance for a business acquisition, or to repay the $30.0 million in the
event the Company did not enter a definitive purchase agreement prior to March
31, 1999, and complete the acquisition by December 31, 1999. As the TPOA
Acquisition is expected to close well before December 31, 1999, the Company
anticipates using the $30.0 million to partially fund the TPOA Acquisition. The
Senior Notes have no amortization requirements until 2001, the Senior
Subordinated Notes are due 2007 and the term facility has annual amortization
requirements of $1.4 million until 2003. The interest rate on the Term Loan was
increased by a percentage point to LIBOR plus 3.75%.

         The Company expects to invest approximately $260 million in the Network
between 1997 and the end of 2001 (with $150 million of this amount having been
spent by the end of 1998) in connection with the Capital Program to upgrade,
rebrand, reimage and increase the number of travel centers. Approximately $50
million of the capital expenditures intended to be made represents normal
ongoing maintenance and related capital expenditures. The Company has budgeted
additional expenditures in order to add new sites, rebrand and reimage sites,
add additional nonfuel offerings (such as QSR offerings) at existing sites, make
required environmental improvements, and purchase, install and upgrade its
information systems. The capital expenditures budget for 1999 is approximately
$60 million.

         The Company anticipates that it will be able to fund its 1999 working
capital requirements and capital expenditures primarily from funds generated
from the refinancings, funds generated from operations, funds generated from
asset sales, and, to the extent necessary, from borrowings under the revolving
facility. The Company's long-term liquidity requirements, including capital
expenditures, are expected to be financed by a combination of internally
generated funds, borrowings and other sources of external financing as needed.

FREIGHTLINER RELATIONSHIP

         The Company has signed a letter of intent with Freightliner Corporation
("Freightliner") to become an authorized provider of express service, minor
repair work and a specified menu of warranty repairs to Freightliner's
customers. Under the proposed agreement, the Company will be incorporated into
Freightliner's 24-hour customer assistance center database and be a major
referral point for emergency and roadside repairs and will also have access to
Freightliner's parts distribution, service and technical information systems.
Freightliner, a DaimlerChrysler Company, is the leading heavy truck manufacturer
in North America. The Company believes this relationship will result in a
considerable increase in nonfuel revenues generated by the Company's truck
maintenance and repair shops.


                                       23
<PAGE>   25

         Freightliner has also agreed to acquire a minority ownership interest
in the Company. However, at this time a specific ownership percentage has not
yet been determined. Consummation of the related agreements to finalize the
various aspects of the Company's proposed relationship with Freightliner is
subject to a variety of conditions, including satisfactory completion of
customary due diligence review procedures and successful negotiation of
definitive agreements.

ENVIRONMENTAL MATTERS

         The Company's operations and properties are subject to certain
Environmental Laws.

         The Company owns and operates USTs and ASTs at Company-operated Sites
and Leased Sites which must comply with certain statutory and regulatory
requirements that went into effect on December 22, 1998. The Company has made
all necessary upgrades to comply with those requirements. During 1998,
approximately $6.7 million of environmental-related expenditures were incurred
with respect to remediation, maintenance, compliance, monitoring and capital
items, including costs to upgrade USTs and to meet the December 22, 1998
requirements. In addition, the Company has estimated the current ranges of
estimated remediation costs at currently active sites and what it believes will
be its ultimate share for such costs after required indemnification and
remediation is performed by Unocal and BP under the respective Environmental
Agreements and has a reserve for such matters, including those matters for which
the Company assumed the related liability as part of the Burns Acquisition, of
$3.9 million as of December 31, 1998. While it is not possible to quantify with
certainty the environmental exposure, in the opinion of management, the
potential liability, beyond that considered in the reserve, for all
environmental proceedings, based on information known to date and environmental
laws currently enacted, will not have a material adverse effect on the financial
condition, results of operations or liquidity of the Company.

YEAR 2000 READINESS DISCLOSURE

         The Year 2000 issue results from date sensitive computer programs that
improperly handle dates beyond 1999. This issue will impact virtually every
business that relies on a computer, including the Company, its customers and
suppliers and other third party service providers such as credit and trucking
fleet billing card providers, utilities and other basic service providers. The
Company's management is working to ensure that its Year 2000 issues are
addressed on a company-wide basis, which includes (1) internal information
technology (IT) systems such as any hardware and software used to process daily
operational data and information; (2) non-IT systems or embedded technology such
as micro-controllers contained in various equipment; and (3) Year 2000
compliance of key third parties, including suppliers, customers and third party
credit and trucking fleet billing card providers, especially those with which
the Company conducts business electronically.

         The Company is currently in the process of making its IT systems Year
2000 compliant. As a result of the Combination Plan, management determined a new
IT system would be required to handle the combined operations of TA and
National, as neither TA's nor National's current IT systems have the capability
of handling the combined operations as effectively as desired. To this end, the
Company has begun implementing the SAP Enterprise Resource Planning system that
will replace substantially all of the legacy financial IT systems currently in
use, some of which are not Year 2000 compliant. The SAP system is Year 2000
compliant, and management expects to begin using the financial, asset management
and project system modules of the new system during the second quarter of 1999.
A second phase of the implementation of SAP, which will replace the Company's
fuel management and accounting systems, is targeted for completion in October of
1999. This implementation has not been accelerated due to Year 2000 issues. Only
minor modifications are necessary to current systems that will continue to be
used, such as the Access 76 fleet billing system and certain retail point of
sale systems, and management is confident these modifications will be completed
and tested prior to December 31, 1999. The costs of these modifications are not
expected to be material to the Company's financial position or results of
operations.



                                       24
<PAGE>   26


         The Company is currently in the process of surveying and testing its
significant non-IT systems, such as in fuel pumps, cash registers and truck
repair equipment, to determine whether such systems are Year 2000 compliant. As
a result of the significant capital improvements made at the Company's sites,
included under the Capital Program, over the past few years, substantially all
of the Company's mission critical non-IT systems recently have been upgraded or
are in the process of being upgraded and are believed to be Year 2000 compliant,
although the Company is still in the process of formally testing and evaluating
its non-IT systems. The Company expects to complete this process by June 30,
1999.

         The Company's management believes that its efforts and plans to ensure
its internal IT and non-IT systems are Year 2000 compliant are adequate and,
therefore, the greatest risk to the Company's operations lies with third
parties. The Company is still in the early stages of contacting key third
parties and, accordingly, has not yet determined what its most reasonably likely
worst case scenario is with respect to Year 2000 issues. Consequently, the
Company has not yet prepared a contingency plan for dealing with that scenario.
The Company expects that it will complete its third party surveys and
assessments by June 30, 1999. When that process is complete, management will
complete an analysis of its most reasonably likely worst case scenario and a
contingency plan to deal with that scenario will be developed.

         While management believes the Company is adequately addressing the Year
2000 issue and will not suffer a material adverse effect from such issues, there
is no guarantee that the estimated completion dates and costs will be achieved.
In addition, there is no guarantee that key third parties will be successful in
completing their Year 2000 efforts. If needed modifications are not made on a
timely basis, including to third parties' systems, and/or contingency plans are
not implemented, the Year 2000 issue could have an adverse effect on the
Company's operations and, potentially, its financial condition.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

         In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), which requires entities to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Changes in the fair values are required to be recognized in
income when they occur, except for derivatives that qualify as hedges. For the
Company, adoption of this standard is required for the first quarter of 2000. At
this time, the Company has not completed its analysis of the effect on its
financial statements of adopting FAS 133. However, as the Company utilizes
derivatives on a limited basis and only as hedges of either commodity price risk
or interest rate risk, the effect of FAS 133 on the Company's statement of
income is not expected to be material.

FORWARD-LOOKING STATEMENTS

         The Company is making this statement in order to satisfy the "safe
harbor" provision contained in the Private Securities Litigation Reform Act of
1995. The statements contained in this report that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Moreover, from time to time the Company may issue other
forward-looking statements. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and business environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: competition from other travel center and truckstop operators,
including additional or improved services or facilities of competitors; the
economic condition of the trucking industry, which in turn is dependent on
general economic factors; diesel and gasoline fuel pricing; availability of fuel
supply; the potential future impact of Year 2000 related issues; and
difficulties that may be encountered by the Company or its franchisees in
implementing the Combination Plan, integrating the Burns sites into the Network,
completing the TPOA Acquisition and finalizing the Freightliner agreements. The
forward-looking statements should be considered in light of these factors.


                                       25
<PAGE>   27

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to commodity price risk and interest rate risk.
The Company's fuel purchase contracts provide for purchase prices based on
average market prices for diesel and gasoline, exposing the Company to commodity
price risk. The Company mitigates this risk exposure in a few ways, but
primarily by maintaining only a few days of inventory on hand and selling a
large portion of its fuel volume under "cost plus" pricing formulae, which
minimize the effect on the Company's margins of sudden sharp changes in
commodity market prices. The Company manages the price exposure related to sales
volumes not covered by cost plus arrangements through the use, on a limited
basis, of derivative instruments designated by management as hedges of
anticipated purchases. The total volume covered by open derivative contracts at
any point in time during 1998 was immaterial. There were no open derivative
contracts at December 31, 1998. The interest rate risk faced by the Company
results from the highly-leveraged position of the Company and its level of
variable rate indebtedness, the rates for which are based on short-term lending
rates, primarily the London Interbank Offered Rate. The following table
summarizes information about the Company's financial instruments that are
subject to changes in interest rates:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 1998
                                            --------------------------------------------------------------
                                                      FIXED RATE                    VARIABLE RATE
                                                     INDEBTEDNESS                   INDEBTEDNESS
                                            ------------------------------- ------------------------------
                                                               WEIGHTED                         WEIGHTED
                                               PAYMENT          AVERAGE        PAYMENT          AVERAGE
                                                AMOUNT       INTEREST RATE      AMOUNT       INTEREST RATE
                                            --------------- --------------- -------------- ---------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                          <C>                 <C>         <C>                <C>  
Year Ended December 31:
     1999...................................  $        43         9.99%       $     1,446        8.90%
     2000...................................           47         9.99%             1,446        8.90%
     2001...................................       17,803        10.02%             1,446        8.90%
     2002...................................       17,809        10.15%             1,446        8.90%
     2003...................................           66        10.28%            65,448        8.90%
Thereafter..................................      127,802        10.33%           157,657        8.90%
                                              -----------                     -----------
Total.......................................  $   163,570        10.17%       $   228,889        8.90%
                                              ===========                     ===========
Fair value..................................  $   151,437                     $   228,889
                                              ===========                     ===========
</TABLE>





                                       26
<PAGE>   28


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>

Index to Consolidated Financial Statements and Supplementary Data:                                           PAGE
                                                                                                             ----
<S>                                                                                                           <C>
   Financial Statements:
       Report of Independent Accountants..................................................................    28
       Consolidated Balance Sheet at December 31, 1998 and 1997...........................................    29
       Consolidated Statement of Income and Retained Earnings for the three years ended December 31, 1998.    30
       Consolidated Statement of Cash Flows for the three years ended December 31, 1998...................    31
       Notes to the Consolidated Financial Statements.....................................................    32
   Supplementary Data:
      Quarterly financial data - unaudited................................................................    65
</TABLE>




                                       27
<PAGE>   29






                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors 
and Stockholders of 
TravelCenters of America, Inc.

         In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of TravelCenters of America, Inc. and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Cleveland, Ohio
March 16, 1999



                                       28
<PAGE>   30


                         TRAVELCENTERS OF AMERICA, INC.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31
                                                                                        ------------------------------
                                                                                             1998           1997
                                                                                        ------------------------------
                                                                                          (IN THOUSANDS OF DOLLARS)
<S>                                                                                       <C>            <C>        
                                         ASSETS
 Current assets:
    Cash (Note 12)....................................................................    $    89,200    $    71,756
    Accounts receivable (less allowance for doubtful accounts of $3,907 for 1998 and           61,012         68,433
       $2,707 for 1997)...............................................................
    Inventories.......................................................................         42,952         33,718
    Deferred income taxes.............................................................          4,459          3,740
    Other current assets..............................................................         12,619         10,256
                                                                                          -----------    -----------

         Total current assets.........................................................        210,242        187,903
 Notes receivable, net................................................................          1,239          1,692
 Property and equipment, net..........................................................        361,803        286,472
 Intangible assets....................................................................         21,141         15,651
 Deferred financing costs.............................................................          9,284         11,786
 Deferred income taxes................................................................          2,924              -
 Other assets.........................................................................          3,428          4,288
                                                                                          -----------    -----------
         Total assets.................................................................    $   610,061    $   507,792
                                                                                          ===========    ===========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
    Current maturities of long-term debt..............................................    $     1,594    $       500
    Accounts payable..................................................................         20,915         29,035
    Other accrued liabilities.........................................................         88,165         72,265
                                                                                          -----------    -----------
         Total current liabilities....................................................        110,674        101,800
 Commitments and contingencies (Note 18)
 Long-term debt (net of unamortized discount).........................................        390,865        289,625
 Deferred income taxes................................................................            937          4,985
 Other long-term liabilities..........................................................          9,162          4,479
                                                                                          -----------    -----------
                                                                                              511,638        400,889

 Mandatorily redeemable senior convertible participating preferred stock..............         69,974         61,404

 Other preferred stock, common stock and other stockholders' equity...................         43,547         43,945
 Retained earnings (deficit)..........................................................        (15,098)         1,554
                                                                                          -----------    -----------
                                                                                               28,449         45,499
         Total liabilities and stockholders' equity...................................    $   610,061    $   507,792
                                                                                          ===========    ===========
</TABLE>

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



                                       29
<PAGE>   31


                         TRAVELCENTERS OF AMERICA, INC.
             CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                           --------------------------------------------
                                                                               1998           1997           1996
                                                                           -------------- -------------- --------------
                                                                                    (IN THOUSANDS OF DOLLARS
                                                                                    EXCEPT PER SHARE AMOUNTS)
<S>                                                                          <C>            <C>            <C>       
 Revenues:
    Fuel...................................................................  $  554,735     $  708,637     $  550,212
    Nonfuel................................................................     347,531        293,843         99,991
    Rent and royalties.....................................................      21,544         36,848         46,055
                                                                             ----------     ----------     ----------
       Total revenues......................................................     923,810     1,039,328         696,258
 Cost of revenues (excluding depreciation).................................     627,149        773,084        568,694
                                                                             ----------     ----------     ----------

 Gross profit (excluding depreciation).....................................     296,661        266,244        127,564

 Operating expenses........................................................     195,751        168,334         56,077
 Selling, general and administrative expenses..............................      34,256         35,619         31,265
 Refinancing, transition and development costs.............................       3,648         15,212          2,197
 Depreciation and amortization.............................................      44,662         35,840         17,838
 (Gain) loss on sales of property and equipment............................      (1,195)       (11,244)         1,464
 Stock compensation expense................................................       2,500          1,400            667
 Other operating income, net...............................................      (2,054)        (1,262)          (807)
 Income of subsidiary held for disposition.................................           -              -         (5,255)
                                                                             ----------     ----------     ----------

 Income from operations....................................................      19,093         22,345         24,118
 Interest (expense), net...................................................     (25,371)       (22,898)       (15,236)
                                                                             ----------     ----------     ----------

 (Loss) income before income taxes and extraordinary item..................      (6,278)          (553)         8,882
 (Benefit) provision for income taxes......................................      (2,101)          (344)         3,349
                                                                             ----------     ----------     ----------
 (Loss) income before extraordinary item...................................      (4,177)          (209)         5,533
 Extraordinary loss, less applicable income tax benefits of $2,012 in 1998
    and $3,608 in 1997 (Note 12)...........................................      (3,905)        (5,554)             -
                                                                             ----------     ----------     ----------

 Net (loss) income.........................................................      (8,082)        (5,763)         5,533

    Less: preferred dividends..............................................      (8,570)        (7,520)        (6,599)

 Retained earnings-beginning of the year...................................       1,554         14,837         15,903
                                                                             ----------     ----------     ----------
 Retained earnings (deficit)-end of the year...............................  $  (15,098)    $    1,554     $   14,837
                                                                             ==========     ==========     ==========
 Earnings per common share:                                                  $  (21.12)     $   (7.56)     $   (0.81)
    Income (loss) before extraordinary item
    Extraordinary loss                                                       $   (6.47)         (5.44)             -
                                                                             ---------      ---------      ---------
    Net income (loss)                                                        $  (27.59)     $  (13.00)     $   (0.81)
                                                                             =========      =========      =========
 Earnings per common share - assuming dilution:                              $  (21.12)     $   (7.56)     $   (0.81)
    Income (loss) before extraordinary item
    Extraordinary loss                                                           (6.47)         (5.44)             -
                                                                             ---------      ---------      ---------
    Net income (loss)                                                        $  (27.59)     $  (13.00)     $   (0.81)
                                                                             =========      =========      =========
</TABLE>

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



                                       30
<PAGE>   32


                         TRAVELCENTERS OF AMERICA, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                          ------------------------------------------------
                                                                               1998            1997            1996
                                                                          --------------- --------------------------------
                                                                                     (IN THOUSANDS OF DOLLARS)

<S>                                                                         <C>             <C>             <C>        
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) ....................................................  $    (8,082)    $    (5,763)    $     5,533
    Adjustments to reconcile net income (loss) to net cash provided by
       operating activities:
       Extraordinary loss.................................................        3,905           5,554               -
       Net income of subsidiary held for disposition......................            -               -          (3,153)
       Depreciation and amortization......................................       44,662          35,840          17,838
       Deferred income tax provision......................................       (7,691)         (4,330)            394
       Provision for doubtful accounts....................................        1,355           1,688           2,545
       Provision for stock compensation...................................        2,500           1,400             667
       (Gain) loss on sale of property and equipment......................       (1,195)        (11,244)          1,464
       Changes in assets and liabilities, adjusted for the effects of
         acquisitions of network assets and the reconsolidation of a 
         subsidiary
         previously held for disposition:
         Accounts receivable..............................................       12,034         (20,773)          5,822
         Inventories......................................................       (4,028)          1,422          (1,588)
         Other current assets.............................................       (2,954)            448          (3,617)
         Accounts payable.................................................       (8,933)         (4,364)         (2,083)
         Other current liabilities........................................       17,475          42,648           6,005
       Other, net.........................................................         (527)           (856)         (2,207)
                                                                            -----------     -----------     -----------

       Net cash provided by operating activities..........................       48,521          41,670          27,620
                                                                            -----------     -----------     -----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisitions of network assets........................................      (63,215)        (15,127)         (2,352)
    Proceeds from sales of property and equipment.........................        3,414          37,958             643
    Capital expenditures..................................................      (65,704)        (60,818)        (20,545)
                                                                            -----------     -----------     -----------

       Net cash used in investing activities..............................     (125,505)        (37,987)        (22,254)
                                                                            -----------     -----------     -----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............................................            -           3,750          14,000
    Revolving loan repayments.............................................            -         (17,750)              -
    Long-term debt borrowings.............................................      229,250         205,000               -
    Long-term debt repayments.............................................     (129,987)       (126,675)        (12,375)
    Proceeds from issuance of stock.......................................            -             329              39
    Repurchase of common stock............................................         (475)         (7,456)           (751)
    Debt issuance costs...................................................       (4,360)        (12,904)              -
    Reconsolidation of subsidiary previously held for disposition......               -               -          14,309
                                                                            -----------     -----------     -----------

       Net cash provided by financing activities..........................       94,428          44,294          15,222
                                                                            -----------     -----------     -----------

         Net increase (decrease) in cash..................................       17,444          47,977          20,588

 Cash at the beginning of the year........................................       71,756          23,779           3,191
                                                                            -----------     -----------     -----------

 Cash at the end of the year..............................................  $    89,200     $    71,756     $    23,779
                                                                            ===========     ===========     ===========
</TABLE>

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



                                       31
<PAGE>   33


                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.       BUSINESS DESCRIPTION AND SUMMARY OF OPERATING STRUCTURE

         The Company, through its operating subsidiaries, is a nationwide
marketer of truck and auto fuel and related products and services through three
networks of full-service travel centers (124 operated under the "TA" and
"TravelCenters of America" trademarks (the "TA Network"), two operated under the
"Unocal 76" trademark (the "National Network") and 17 operated under the "Burns
Bros. Travel Stops" trademark (the "Burns Network")) in 39 states. Of the
network locations at December 31, 1998, the Company owns or leases 133
locations, 30 of which are leased to independent lessee-franchisees
("Operators") of the Company ("Leased Sites"), and 103 of which are operated by
the Company ("Company-operated Sites"). Ten locations are owned or leased and
operated by independent franchisees ("Franchisee-Owners") of the Company
("Franchisee-Owner Sites"). The Company purchases and resells diesel fuel,
gasoline and other travel center products and services to consumers, commercial
fleets, operators and independent franchisees; provides fleet credit card and
customer information services through its proprietary ACCESS 76 and STAR billing
systems; conducts centralized purchasing programs; creates promotional programs;
and, as a franchisor, assists the Operators and Franchisee-Owners in providing
service to commercial fleets and the motoring public.

         The Company was incorporated on December 2, 1992 as National/Auto
Truckstops Holdings Corporation. The Company's name was changed to TravelCenters
of America, Inc. in March 1997. In April 1993, the Company acquired (the
"National Acquisition") the National Network assets from a subsidiary of Unocal
Corporation (together with its subsidiaries "Unocal") and in December 1993
acquired (the "TA Acquisition") the TA Network assets from subsidiaries of The
British Petroleum Company p.l.c. (together with its subsidiaries "BP"). In
December 1998 the Company acquired (the "Burns Acquisition") the Burns Network
from Burns Bros., Inc., and certain of its affiliates (collectively "Burns").

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The TA Acquisition required the consent of the operators and
independent franchisees who were holders of the Company's former Class A Common
Stock (the "Operator Stockholders"). The Operator Stockholders consented to the
TA Acquisition and, in connection therewith, the Company was granted an option
to repurchase, for cash and its stock in TA Holdings Corporation ("TAHC"), all
of its equity securities, including its mandatorily redeemable preferred stock,
and warrants not held by the Operator Stockholders and senior management of
National. Accordingly, the Company's consolidated financial statements presented
the net assets of TAHC as held for disposition. The carrying value thereof
represented the purchase price paid to acquire TAHC plus TAHC's results of
operations subsequent to December 31, 1994. TAHC's results of operations for
1995 and through September 30, 1996 were included in the Company's consolidated
statement of income and retained earnings as a single amount. Effective
September 30, 1996, a decision was made to retain TAHC and, subsequently, the
Company chose to pursue the combination of the operations of the TA and National
Networks. Accordingly, at that date, the carrying value of the Company's
investment in TAHC of $44,637,000 was allocated to the identifiable assets and
liabilities based on the current fair values as of that date. In addition, the
results of operations and cash flows of TAHC are included in the consolidated
results of operations and cash flows of the Company from October 1, 1996. TAHC
had net income of $3,153,000 for the nine months ended September 30, 1996.

         For a pro forma presentation of the Company's consolidated results of
operations for the year ended December 31, 1996, as though TAHC had not been
held for disposition for the period January 1, 1994 through September 30, 1996,
see Note 22.



                                       32
<PAGE>   34
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of
TravelCenters of America, Inc. and its wholly owned subsidiaries, TA Operating
Corporation ("TA"), TA Franchise Systems Inc. ("TAFSI") and National
Auto/Truckstops, Inc. ("National"), and TA Travel, L.L.C., a wholly owned
subsidiary of TA. Intercompany accounts and transactions have been eliminated.
TAHC was included in the consolidated financial statements until the time of the
Company's recapitalization (see Note 4) in March 1997, at which time it was
merged into the Company. TAHC had been the parent of TA, which had been the
parent of TAFSI.

REVENUE RECOGNITION

         Fuel sales and related costs are recognized at the time of delivery of
motor fuel and other products to customers at either the terminal or the
customer's facility and at the time of final sale to consumers at the
Company-operated Sites.

         Franchise and royalty revenues are recognized at the point such
revenues are earned, typically when collectible and when the Company has
fulfilled substantially all of its obligations under the related agreements.

INVENTORIES

         Inventories are stated at cost, which approximates market value, cost
being determined on the first in, first out basis for petroleum products and
principally as the weighted average costs for nonfuel merchandise.

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost, initially determined in
accordance with purchase accounting principles and based largely on independent
professional appraisals. Depreciation is computed on a straight-line basis over
the following estimated useful lives of the assets:

<TABLE>
<CAPTION>

<S>                                                              <C>      
 Buildings and site improvements...........................        15  years
 Pumps and underground storage tanks.......................      5-10  years
 Machinery and equipment...................................      3-10  years
 Furniture and fixtures....................................      5-10  years
</TABLE>

         Repair and maintenance costs are charged to expense as incurred, while
major renewals and betterments are capitalized. The cost and related accumulated
depreciation of property and equipment sold, replaced or otherwise disposed are
removed from the accounts. Any resulting gains or losses are recognized in
operations.




                                       33
<PAGE>   35
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DEFERRED FINANCING COSTS AND INTANGIBLE ASSETS

         Deferred financing costs were recorded in conjunction with issuing
long-term debt and are being amortized on a basis approximating the interest
method over the lives of the related debt instruments, ranging from five to ten
years (see Note 12). The intangible assets are being amortized on a
straight-line basis over their estimated lives, principally the terms of the
related contractual agreements giving rise to them (see Note 9).

INTERNAL-USE SOFTWARE COSTS

         During the application development stage of an internal-use computer
software project, the Company capitalizes (i) the external direct costs of
materials and services consumed in developing or obtaining the internal-use
computer software, (ii) to the extent of time spent directly on the project,
payroll costs of employees directly associated with and who devote time to the
project, and (iii) related interest costs incurred. Internal and external costs
incurred in the preliminary project stage and post-implementation stage, such as
for exploring alternative technologies, vendor selection and maintenance, are
expensed as incurred, as are all training costs. The costs of significant
upgrades and enhancements that result in additional functionality are accounted
for in the same manner as similar costs for new software projects. The costs of
all other upgrades and enhancements are expensed as incurred.

IMPAIRMENT OF LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No.
(SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," impairment charges are recognized when the
carrying values of long-lived assets to be held and used in the business exceed
the estimated undiscounted future cash flows of those assets, and when the
carrying values of long-lived assets to be disposed of exceed the estimated fair
value less cost to sell for those assets. Such impairment charges are recognized
in the period during which the circumstances surrounding an asset to be held and
used have changed such that the carrying value is no longer recoverable, or
during which a commitment to a plan to dispose of the asset is made. Such tests
are performed at the individual travel center level. In addition, intangible
assets are subjected to further evaluation in accordance with Accounting
Principles Board Opinion 17, "Intangible Assets," and impairment charges are
recognized when events and circumstances indicate the carrying value of the
intangible asset exceeds the future benefit of the asset. Impairment charges are
included in depreciation and amortization in the income statement.

CLASSIFICATION OF COSTS AND EXPENSES

         Cost of revenues represents the costs of fuels and other products sold,
including freight. Operating expenses consist primarily of labor, maintenance,
supplies, utilities, warehousing, purchasing and occupancy costs. Development
expenses represent costs incurred to primarily acquire and establish new Network
locations. Refinancing expenses represent nonrecurring costs incurred in
attempts to refinance the Company's indebtedness. Transition expenses represent
the nonrecurring costs incurred by the Company in connection with effecting the
Combination Plan, including severance and relocation expenses, costs to convert
Leased Sites to Company-operated Sites, costs to dispose of Leased Sites and
terminate Franchisee-Owner Sites and costs to consolidate management and
operation of the Company's two networks into a single network. Costs of
advertising are expensed as incurred.




                                       34
<PAGE>   36
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ENVIRONMENTAL REMEDIATION

         The Company provides for remediation costs and penalties when the
responsibility to remediate is probable and the amount of associated costs is
reasonably determinable. Generally, the timing of remediation accruals coincides
with completion of a feasibility study or the commitment to a formal plan of
action. If recoveries of remediation costs from third parties are probable, a
receivable is recorded. Accruals are not recorded for the costs of remediation
activities undertaken on behalf of the Company by Unocal and BP, at Unocal's and
BP's sole expense (see Note 18).

INCOME TAXES

         Deferred income tax assets and liabilities are established to reflect
the future tax consequences of differences between the tax bases and financial
statement bases of assets and liabilities.

CASH AND CASH EQUIVALENTS

         For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an initial maturity of three months or less to be
cash equivalents.

CONCENTRATION OF CREDIT RISK

         The Company grants credit to its customers and may require letters of
credit or other collateral.

DERIVATIVE INSTRUMENTS

         On a limited basis, the Company engages in commodity risk management
activities within the normal course of its business as an end-user of derivative
instruments. These commodity-based instruments are used to manage exposure to
price fluctuations related to the anticipated purchase of diesel fuel and
gasoline.

         Changes in market value of derivative instruments are deferred and are
subsequently recognized in income in the same period as the underlying
transaction. Recorded deferred gains or losses are reflected within other
current assets or other current liabilities.

         At December 31, 1998 there were no open derivative contracts. At
December 31, 1997 the amount of open derivative contracts and the related fair
market value and deferred gains and losses were immaterial.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which estimation is
practicable:

         Cash and short-term investments, accounts receivable and accounts
payable: The fair values of financial instruments classified as current assets
or liabilities approximate the carrying values due to the short-term maturity of
the instruments.

         Long-term debt: The fair value of the Company's fixed-rate indebtedness
that is publicly traded is estimated based on the quoted price for those notes.
The fair value of the Company's fixed-rate indebtedness that is not publicly
traded is estimated based on the current borrowing rates available to the
Company for financings with similar terms and maturities. The fair values of the
Company's variable-rate indebtedness approximates the carrying value of that
indebtedness. (See Note 12.)


                                       35
<PAGE>   37
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

RECLASSIFICATIONS

         Certain reclassifications of prior years' data have been made to
conform with the current year presentation.

3.       ACQUISITIONS

         Burns Acquisition. On December 3, 1998, the Company acquired
substantially all of the truckstop assets owned by Burns for cash consideration
of $56,800,000 and the assumption of certain liabilities. Specifically, the
Company acquired from Burns the land, buildings, equipment and inventories at 17
of the 19 sites comprising the Travel Stops division of Burns, the equipment and
inventories used in Burns' fuel wholesaling and transportation businesses and
certain accounts receivable related to the acquired assets. For the fiscal year
ended June 30, 1998, these sites sold 162,200,000 gallons of diesel fuel and had
non-fuel sales and operating expenses of $44,700,000 and $28,100,000,
respectively.

         The total cost of the assets acquired was $60,728,000, comprised of the
cash consideration paid to Burns of $56,240,000, liabilities assumed of
$3,920,000 and direct costs of the acquisition of $568,000. Under purchase
accounting principles, the cost was allocated to the assets acquired on the
basis of their fair values at the acquisition date as follows:

<TABLE>
<CAPTION>
                                                    FAIR VALUE       ALLOCATED COSTS
                                               ----------------    -----------------
                                                     (IN THOUSANDS OF DOLLARS)

<S>                                               <C>                 <C>       
Accounts receivable.........................      $    6,542          $    6,542
Inventories.................................           3,839               3,839
Other current assets........................             471                 471
Property & equipment........................          56,950              49,876
                                                  ----------          ----------
                                                  $   67,802          $   60,728
                                                  ==========          ==========
</TABLE>


         TPOA Acquisition. On February 26, 1999, the Company entered into a
merger agreement pursuant to which the Company intends to acquire (the "TPOA
Acquisition") 100% of the voting stock of Travel Ports of America, Inc. ("TPOA")
at a price of $4.30 per share. Under the terms of the merger agreement and
certain ancillary agreements, the Company will pay cash of approximately
$40,500,000 for all of TPOA's common shares except approximately 653,000 common
shares, held by TPOA's chairman and chief executive officer, that will be
exchanged for approximately 85,000 shares of the Company's common stock. In
addition, the Company expects to pay cash of approximately $15,000,000 to
$20,000,000 to retire substantially all of TPOA's indebtedness expected to be
outstanding at the merger date and to pay various costs of the transaction. TPOA
operates a network (the "TPOA Network") of 16 travel centers in seven states,
primarily in the northeastern U.S. This acquisition, if ultimately consummated,
is expected to close in June 1999. A closing of the merger is subject to a
variety of conditions, including approval by TPOA's shareholders.



                                       36
<PAGE>   38
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


     4.   RECAPITALIZATION, RESTRUCTURING AND COMBINATION

         On March 27, 1997, the Company was recapitalized and restructured
pursuant to a series of transactions in which (i) the Company's subsidiaries
were restructured such that the Company directly owns its three subsidiaries,
TA, TAFSI and National (the Company's former subsidiary, TAHC, was merged into
the Company as of such date), (ii) the Company's indebtedness under the old
National and TA debt agreements was refinanced (the "1997 Refinancing"), and
(iii) TA and National guaranteed the Company's indebtedness under its new credit
facilities. The Company's credit facilities were amended in December 1998 (the
"1998 Refinancing"). See Note 12 for further discussion of each of the 1998
Refinancing and the 1997 Refinancing.

         There are three primary elements to the Combination Plan that was
adopted in January 1997 and has been executed by the Company throughout 1997 and
1998: (1) integrating the management of the TA and National Networks, (2)
converting the Existing Network sites to one Network, and (3) rationalizing and
further developing the Company's Network. As a result of implementing the
Combination Plan, for the years ended December 31, 1998 and 1997, the Company
incurred approximately $3,648,000 and $15,212,000 respectively, of expense,
included in refinancing, transition and development costs in the Company's
consolidated financial statements. These expenses relate to, among other things,
(i) employee separations, (ii) the costs to convert National Network travel
centers to Network travel centers, (iii) the costs to dispose of travel centers
or terminate lease or franchise agreements, and (iv) the costs of integrating
the management and operations of the Existing Networks into the Network,
including relocation, travel, training, and legal expenses. In January 1997,
certain of National's executive officers resigned and related severance costs of
approximately $774,000 were recognized. In May 1997, management finalized its
plans regarding the employee terminations and, accordingly, the related expense
of approximately $1,833,000 was recognized.

5.       EARNINGS PER SHARE

         The computation of basic earnings per common share is based upon the
weighted-average number of shares of common stock outstanding. A reconciliation
of the income and shares used in the computation follows:

<TABLE>
<CAPTION>
                                                                        FOR THE YEAR ENDED DECEMBER 31, 1998
                                                                  -----------------------------------------------
                                                                      INCOME           SHARES         PER-SHARE
                                                                    (NUMERATOR)     (DENOMINATOR)      AMOUNT
                                                                  ---------------- ------------------------------
                                                                         (DOLLARS AND SHARES IN THOUSANDS)

<S>                                                                 <C>                       <C>    <C>        
     Income (loss) before extraordinary item....................... $     (4,177)
     Less:  Preferred stock dividends..............................       (8,570)
                                                                    ------------
     Basic EPS and Diluted EPS
          Income (loss) available to common stockholders........... $    (12,747)             604    $   (21.12)
                                                                    ============     ============    ==========
</TABLE>

         The assumed conversion of stock options, warrants and convertible
series of preferred stock would have an anti-dilutive effect on earnings per
share for 1998. Effective January 1, 1999, 232,750 options to purchase common
stock were granted to management and non-employee directors.



                                       37
<PAGE>   39
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        FOR THE YEAR ENDED DECEMBER 31, 1997
                                                                  -------------------------------------------------
                                                                      INCOME           SHARES         PER-SHARE
                                                                    (NUMERATOR)     (DENOMINATOR)      AMOUNT
                                                                  ---------------- --------------------------------
                                                                         (DOLLARS AND SHARES IN THOUSANDS)

<S>                                                                 <C>                     <C>      <C>        
     Income before extraordinary item.............................. $       (209)
     Less:  Preferred stock dividends..............................       (7,520)
                                                                    ------------
     Basic EPS and Diluted EPS
          Income (loss) available to common stockholders........... $     (7,729)           1,022    $    (7.56)
                                                                    ============     ============    ==========
</TABLE>


The assumed conversion of stock options, warrants and convertible series of
preferred stock would have an anti-dilutive effect on earnings per share for
1997.

<TABLE>
<CAPTION>
                                                                      FOR THE YEAR ENDED DECEMBER 31, 1996
                                                                  ----------------------------------------------
                                                                      INCOME          SHARES        PER-SHARE
                                                                   (NUMERATOR)    (DENOMINATOR)       AMOUNT
                                                                  --------------- --------------- ---------------
                                                                        (DOLLARS AND SHARES IN THOUSANDS)

<S>                                                                  <C>                  <C>        <C>        
     Income before extraordinary item..............................  $    5,533
     Less:  Preferred stock dividends..............................      (6,599)
                                                                     ----------
     Basic EPS
          Income available to common stockholders..................  $   (1,066)          1,319      $    (0.81)
                                                                     ==========      ==========      ==========
</TABLE>


The assumed conversion of stock options, warrants and convertible series of
preferred stock would have an anti-dilutive effect on earnings per share for
1996.

6.       INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                             -------------------------------
                                                                                    1998            1997
                                                                             --------------- ---------------
                                                                                 (IN THOUSANDS OF DOLLARS)

<S>                                                                             <C>             <C>       
  Nonfuel merchandise...................................................        $   39,973      $   30,883
  Petroleum products....................................................             2,979           2,835
                                                                                ----------      ----------

        Total inventories...............................................        $   42,952      $   33,718
                                                                                ==========      ==========
</TABLE>




                                       38
<PAGE>   40
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


7.    NOTES RECEIVABLE

         The Company has notes receivable agreements with certain Operators and
Franchisee-Owners to finance on a long-term basis past due accounts receivable
owed by those customers. Certain of these customers are related parties (see
Note 17). The notes have terms ranging from six months to six years and
principally accrue interest at a variable rate of the prime lending rate plus 2
percent. The Company also has notes receivable from management stockholders
received as partial consideration for purchases of common stock (see Note 15).
These notes have terms of nine years and accrue interest at fixed rates between
4.86 and 7.0 percent. 

         Notes receivable consists of the following:

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                            ----------------------------
                                                                                1998            1997
                                                                            --------------  ------------
                                                                              (IN THOUSANDS OF DOLLARS)
                                                                    
<S>                                                                           <C>             <C>      
Principal amount of notes outstanding.......................................  $   2,351       $   2,939
Less: allowance for doubtful accounts.......................................        280             877
                                                                              ---------       ---------
                                                                                  2,071           2,062
Less: amounts due within one year...........................................        832             370
                                                                              ---------       ---------
Notes receivable, net.......................................................  $   1,239       $   1,692
                                                                              =========       =========
</TABLE>                                    

         The amount due within one year is included within other current assets
on the balance sheet.

8.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                           -------------------------------
                                                                                1998            1997
                                                                           --------------- ---------------
                                                                               (IN THOUSANDS OF
                                                                                   DOLLARS)
                                                                       
<S>                                                                          <C>             <C>      
Land and land improvements.................................................  $  65,112       $  51,697
Buildings and improvements.................................................    220,025         173,177
Machinery, equipment and furniture.........................................    107,895          91,069
Construction in progress...................................................     80,599          44,975
                                                                             ---------       ---------
Total cost.................................................................    473,631         360,918
Less: accumulated depreciation.............................................    111,828          74,446
                                                                             ---------       ---------
Property and equipment, net................................................  $ 361,803       $ 286,472
                                                                             =========       =========
</TABLE>                                                               
                                         
         Pursuant to the Combination Plan, nine Company-operated Sites were
being held for sale as of December 31, 1997. Based on the Company's estimated
sales proceeds and costs of selling these sites, an impairment charge totalling
$559,000 was recognized in 1997 with respect to two of the sites. This
impairment charge is included in depreciation and amortization in the income
statement. As a result of revised estimates of probable sale proceeds, this
impairment reserve was reversed in the second quarter of 1998. During 1998, two
of these sites were sold, and condemnation proceeds were received for a portion
of a third site that was condemned by the state as part of a highway
construction project. The Company has re-evaluated the remaining seven sites and
determined that it would no longer actively market for sale five of those sites.
The total carrying value of the two sites held for sale at December 31, 1998 was
$2,011,000. As of December 31, 1998, the estimated net sales proceeds of the two
sites held for sale exceed the respective carrying values. During 1998, these
two sites generated a loss from operations of $56,000.



                                       39
<PAGE>   41
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



         During the first quarter of 1998, the estimated useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years in order to conform National's estimated useful lives to those of TA. The
effect of this change in estimate resulted in reductions in income before
extraordinary items, net income and earnings per share of $9.5 million, $5.7
million and $9.08, respectively. This change resulted in these assets becoming
fully depreciated at March 31, 1998.

9.       INTANGIBLE ASSETS

         Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                         -----------------------------
                                                                             1998            1997
                                                                         --------------  -------------
                                                                            (IN THOUSANDS OF DOLLARS)
                                                             
<S>                                                                        <C>             <C>       
         Noncompetition agreements......................................   $   26,200      $   26,200
         Leasehold interest.............................................        1,724           1,724
         Trademarks.....................................................        2,313           2,313
         Franchise goodwill.............................................       16,631           7,348
                                                                           ----------      ----------
                                                             
         Total cost.....................................................       46,868          37,585
         Less: accumulated amortization.................................       25,727          21,934
                                                                           ----------      ----------
                                                             
         Intangible assets, net.........................................   $   21,141      $   15,651
                                                                           ==========      ==========
</TABLE>
                                       
         As part of the National and TA Acquisitions, the Company entered into
noncompetition agreements with Unocal and BP pursuant to which Unocal and BP
each agreed to refrain from re-entering the truckstop business for periods of
ten and seven years, respectively, from the acquisition dates. The intangible
assets related to these noncompetition agreements represent the present values
of the estimated cash flows the Company would lose due to competition resulting
from re-entry of Unocal or BP into the travel center market were they not
constrained from doing so. These intangible assets are being amortized over the
ten and seven year periods.

         Leasehold interest represents the value, obtained through the TA
Acquisition, of favorable lease provisions at one TA Network location, the lease
for which extended 11 1/2 years from the TA Acquisition. The leasehold interest
is being amortized over the 11 1/2 year period. Trademarks relates primarily to
the Company's purchase of the "Truckstops of America" and "Country Pride"
trademarks, service marks, trade names and commercial symbols. The trademarks
are being amortized over their estimated economic life of 15 years.

         Franchise goodwill results from the acquisitions of the businesses and
operating assets related to Leased Sites, and represents the excess of amounts
paid to the related Operators over the fair values of the tangible assets
acquired. For the years ended December 31, 1998, 1997 and 1996, the Company
recorded acquired goodwill of $9,283,000, $6,354,000 and $994,000, respectively.
This goodwill is amortized on a straight-line basis over fifteen years. During
the fourth quarter of 1997, as a result of a review of the operations of the
acquired travel centers, an impairment charge of $6,941,000 was recorded with
respect to the goodwill. This charge is included in depreciation and
amortization in the income statement.



                                       40
<PAGE>   42
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



10.      OTHER ACCRUED LIABILITIES

         Other accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                       ------------------------------
                                                                             1998            1997
                                                                       --------------  --------------
                                                                           (IN THOUSANDS OF DOLLARS)

<S>                                                                        <C>            <C>       
  Taxes payable, other than income taxes................................   $   14,422     $   16,605
  Accrued wages and benefits............................................       13,366         10,968
  Interest payable......................................................        4,852          4,371
  Other accrued liabilities.............................................       55,525         40,321
                                                                           ----------     ----------

  Total other accrued liabilities.......................................   $   88,165     $   72,265
                                                                           ==========     ==========
</TABLE>

11.      REVOLVING LOAN

         The Company has available a revolving loan facility of $40,000,000 (see
Note 12). The interest rate for borrowings under this revolving loan facility is
based on either an alternate base rate (ABR) plus 1.75 percent or an adjusted
London Interbank Offered Rate (LIBOR) plus 2.75 percent. Commitment fees are
calculated as 1/2 of 1 percent of the daily average unused amount of the
revolving loan commitment. There were no borrowings outstanding under the
revolving loan facility at December 31, 1998 or 1997, although $1,529,000 of
available borrowings were reserved for letters of credit at both December 31,
1998 and 1997.

12.      LONG-TERM DEBT

         In March 1997 the Company completed the 1997 Refinancing, whereby it
refinanced the existing indebtedness of TA and National with new borrowings by
the Company. The Company issued $125,000,000 aggregate principal amount of 10
1/4% Senior Subordinated Notes due 2007, entered into a Credit Agreement through
which it obtained an $80,000,000 senior secured term loan facility (the "Term
Loan") and a $40,000,000 revolving credit facility, redeemed all of the
outstanding Subordinated Notes of TA and National, respectively, and a portion
of the Senior Notes of TA (the "TA Old Senior Notes"), and, pursuant to a Senior
Secured Note Exchange Agreement, exchanged $85,500,000 aggregate principal
amount of Senior Secured Notes ($35,500,000 of Series I Senior Secured Notes and
$50,000,000 of Series II Senior Secured Notes) of the Company for the Senior
Notes of National and the unredeemed TA Old Senior Notes.

         In December 1998 the Company completed the 1998 Refinancing by
increasing the Term Loan by $150,000,000. Of the total amount borrowed,
$50,000,000 was utilized to retire the Company's Series II Senior Secured Notes
and $42,000,000 was specified to prefund planned capital expenditures and
business acquisitions and required to be placed in a cash collateral account
until used for such expenditures. Provisions of the debt agreements require the
Company to use $30,000,000 of the cash collateral account balance for a business
acquisition, or to use the $30,000,000 to repay indebtedness in the event that
an acquisition is not completed by December 31, 1999. The Company anticipates
using the $30,000,000 to partially fund the TPOA Acquisition (see Note 3).




                                       41
<PAGE>   43
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

         Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                ----------------------------
                                                      INTEREST      MATURITY         1998           1997
                                                     ------------  ------------ ---------------  -----------
                                                                                 (IN THOUSANDS OF DOLLARS)

<S>                                                    <C>            <C>           <C>            <C>    
Term Loan (a).......................................     (b)          2005          228,889         79,625
Series I Senior Secured Notes(c)....................    8.94%         2002           35,500         35,500
Series II Senior Secured Notes(d)...................     (e)          2005                -         50,000
Senior Subordinated Notes(f)........................   10.25%         2007          125,000        125,000
Note payable(g).....................................    5.0%          2018            4,919              -
                                                                                 ----------     ----------

        Total.......................................                                394,308        290,125
Less: amounts due within one year...................                                  1,594            500
Less: unamortized discount..........................                                  1,849              -
                                                                                 ----------     ----------

        Total.......................................                             $  390,865     $  289,625
                                                                                 ==========     ==========
</TABLE>
----------

(a)  On March 21, 1997, in connection with the 1997 Refinancing, the Company
     entered into a Credit Agreement with a group of lenders. On November 24,
     1998, in connection with the 1998 Refinancing, the Company amended its
     Credit Agreement. The Credit Agreement consists of three components: Term
     Loans of a maximum $230,000,000 (increased from $80,000,000 in the 1998
     Refinancing), swingline loans not to exceed $5,000,000, and revolving loans
     (see Note 11) not to exceed $40,000,000 (including any swingline loans
     outstanding and letters of credit issued). There have been no borrowings
     under the swingline loan or revolving loan commitments to date. Payments of
     principal, interest and commitment fees related to the Credit Agreement are
     scheduled at each quarter end in installments of principal ranging from
     $362,000 to $34,000,000, with the first payment under the amended agreement
     due on December 31, 1998, and the last quarterly payment due on March 27,
     2005. Optional prepayments are allowed under the Credit Agreement and, in
     addition, annual prepayments of principal may be required based, among
     other things, on excess cash flows generated by the Company.

(b)  Interest accrues at variable rates based on either an alternate base rate
     (ABR) or an adjusted LIBOR. The rate at which interest accrues is
     calculated as either the ABR rate plus 2.75 percent or the LIBOR rate plus
     3.75 percent. Management has the option to select which rate is to be
     applied at the beginning of each loan period, the term of which varies from
     one month to six months. The interest rate was set on December 4, 1998 at
     8.9 percent for six months. The average effective interest rate for 1998
     was 8.74 percent.

(c)  On March 21, 1997, in connection with the 1997 Refinancing, the Company
     issued $35,500,000 of Series I Senior Secured Notes. Interest payments on
     these notes are due semiannually on June 30 and December 31. Optional
     prepayments are allowed under the note purchase agreement, and required
     payments are due on June 30, 2001, December 31, 2001, June 30, 2002 and
     December 31, 2002 in the amount of $8,875,000 each, such amounts to be
     reduced by certain other prepayments. In the event of certain prepayments,
     the Company may be subject to the make-whole provision of the note
     agreement, which requires payment of a prepayment premium to the holders of
     the Series I Senior Secured Notes. In addition, annual prepayments of
     principal may be required based, among other things, on excess cash flows
     generated by the Company.

(d)  On March 21, 1997, in connection with the 1997 Refinancing, the Company
     issued $50,000,000 of Series II Senior Secured Notes. As part of the 1998
     Refinancing, these notes were repaid.

(e)  Interest accrued at a rate based on an adjusted LIBOR. The average
     effective interest rate for 1998 was 8.6 percent.


                                       42
<PAGE>   44
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(f)  On March 27, 1997, in connection with the 1997 Refinancing, the Company
     issued $125,000,000 of Senior Subordinated Notes. Interest payments on
     these notes are due semiannually on April 1 and October 1. Optional
     prepayments are allowed under certain circumstances under the note purchase
     agreement, any such payments reducing the required payment of $125,000,000
     due April 1, 2007.

(g)  On September 1, 1998, in connection with the purchase of the operating
     assets of a Leased Site, the Company issued a note payable to the former
     Operator of the site for $4,919,000. The note bears interest at 5%, and
     requires quarterly payments of principal and interest of $98,000 thru
     October 1, 2018. The note was recorded net of a discount of $1,875,000.
     From September 1, 1998 to March 4, 1999, this note was temporarily secured
     via assignment of a cash investment of an amount equal to the original
     principal amount of the note. On March 4, 1999 a mortgage interest in the
     related travel center was provided to the former Operator as replacement
     security for this note and the cash was returned to the Company.

         Upon the early extinguishment of the Company's prior indebtedness as a
result of the 1997 Refinancing, the Company recognized an extraordinary loss,
net of applicable income taxes, of $5,554,000. This extraordinary loss consisted
of the write-off of the remaining unamortized balances of deferred financing
costs and debt discount related to the prior indebtedness of $7,847,000 and
$1,315,000, respectively. Approximately $12,904,000 of financing costs
associated with the new indebtedness issued as part of the 1997 Refinancing were
capitalized. As part of the 1998 Refinancing, the Company retired the Series II
Senior Secured Notes and substantially modified the Credit Agreement, resulting
in the early extinguishment of the outstanding balances of both the Series II
Senior Secured Notes and the term loan facilities of the Credit Agreement.
Accordingly, the deferred financing costs related to these borrowings were
written off as an extraordinary loss, net of applicable income taxes, of
$3,905,000. Approximately $4,360,000 of financing costs related to the Credit
Agreement modification were incurred as part of the 1998 Refinancing.

         The borrowings under the Credit Agreement and Senior Secured Note
Exchange Agreement are secured by mortgages on substantially all of the
Company's property and equipment in the manner described in the Master
Collateral and Intercreditor Agreement negotiated between the lending banks
under the Credit Agreement and the Senior Secured Note holders. In the event of
a change in control (as defined in the relevant instruments) of the Company, the
total amount outstanding under the debt agreements described above may be
declared immediately due and payable.

         Under the terms of the Credit Agreement and the Senior Secured Note
Exchange Agreement, the Company is required to maintain certain affirmative and
negative covenants, including minimum interest coverage, minimum consolidated
net worth, minimum current ratio, maximum leverage ratio and maximum amounts of
capital expenditures. The Company was in compliance with the covenants
throughout 1998 and at December 31, 1998.

         Under the terms of the Indenture for the Senior Subordinated Notes due
2007, the Company is required to maintain certain affirmative and negative
covenants that, among other things, provide for a minimum coverage ratio. The
Company was in compliance with the covenants throughout 1998 and at December 31,
1998.

         Scheduled payments of long-term debt in the next five years are
$1,594,000 in 1999; $1,601,000 in 2000; $19,359,000 in 2001; $19,367,000 in 2002
and $65,628,000 in 2003.

         Based on the borrowing rates currently available to the Company for
bank loans and other indebtedness with similar terms and average maturities and
the year-end quoted market price of the Senior Subordinated Notes, the fair
value of long-term debt at December 31, 1998 and 1997 approximated the recorded
value.




                                       43
<PAGE>   45
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


13.      LEASE COMMITMENTS

         The Company has entered into lease agreements covering certain of its
travel center locations, warehouse and office space, computer and office
equipment and vehicles. Most long-term leases include renewal options and, in
certain cases, purchase options. Future minimum lease payments required under
operating leases that have remaining noncancelable lease terms in excess of one
year, as of December 31, 1998, were as follows:

<TABLE>
<CAPTION>
YEAR ENDING                                                                       (IN THOUSANDS OF DOLLARS)
-----------                                                                       -------------------------
DECEMBER 31,

<S>                                                                                       <C>        
1999 ............................................................................         $     5,804
2000 ............................................................................               5,904
2001 ............................................................................               5,411
2002 ............................................................................               4,799
2003 ............................................................................               4,194
Thereafter.......................................................................              40,676
                                                                                          -----------
                                                                                          $    66,788
                                                                                          ===========
</TABLE>

         Total rental expenses on all operating leases were approximately
$6,743,000, $5,658,000 and $1,357,000 for the years ended December 31, 1998,
1997 and 1996, respectively.

14.      MANDATORILY REDEEMABLE SENIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                            ----------------------------
                                                                                 1998           1997
                                                                            --------------- ------------
                                                                             (IN THOUSANDS OF DOLLARS)

<S>                                                                           <C>            <C>      
 Series I-3,000,000 shares authorized, $0.01 par value;                       
     2,680,656 shares issued and outstanding, shown at
     redemption value......................................................   $  51,888      $  45,533
 Series II-1,000,000 shares authorized, $0.01 par value;                         
    934,344 shares issued and outstanding, shown at
    redemption value.......................................................      18,086         15,871
                                                                              ---------      ---------
         Total.............................................................   $  69,974      $  61,404
                                                                              =========      =========
</TABLE>

         Voting Rights. Holders of Series I Mandatorily Redeemable Senior
Convertible Preferred Stock are entitled to vote on all matters, other than the
election of directors (see Note 15-Common Stock-Voting Rights below), submitted
to a vote of the Company's stockholders. Series II Mandatorily Redeemable Senior
Convertible Preferred Stock is non-voting.

         Dividends. Dividends accumulate on the original $10.00 per share
purchase price at a rate of 13.5 percent per annum, compounded semi-annually,
and are not paid currently but accumulate and increase the liquidation
preference. Such dividends accrue whether or not declared by the Board of
Directors. Accrued dividends totaled $33,824,000 and $25,254,000 at December 31,
1998 and 1997, respectively. Holders also participate pro rata, on a share for
share basis, with the outstanding Convertible Preferred Stock and Common Stock,
in dividends and distributions, other than liquidating distributions.




                                       44
<PAGE>   46
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         Conversion. The conversion rights of the holders are the same as those
for holders of the Series I and Series II Convertible Preferred Stock,
respectively, (see Note 15-Convertible Preferred Stock-Conversion below) except,
if the Company consummates an underwritten public offering of Common Stock
pursuant to which the net offering price per share is equal to or greater than
the Trigger Price (defined as an amount equal to $10.00 plus interest at a rate
of 13.5 percent per annum, compounded semi-annually, from the closing date of
the TA Acquisition to the date of such public offering) and the net proceeds
raised in the offering are at least $50 million, the Company will have the right
to require that each share of Series I Mandatorily Redeemable Senior Convertible
Participating Preferred Stock be converted into one share of Series I
Convertible Preferred Stock and that each share of Series II Mandatorily
Redeemable Senior Convertible Participating Preferred Stock be converted into
one share of Series II Convertible Preferred Stock.

         Liquidation Preference. Upon liquidation, holders are entitled to
receive the Senior Liquidation Preference, defined as $10.00 plus the amount of
all accrued and unpaid dividends to the liquidation date, before any payment is
made to holders of Convertible Preferred Stock or Common Stock. Any remaining
amounts available for distribution to the Company's equity holders will be
distributed in the following order of priority:

         (i) holders of Convertible Preferred Stock shall be entitled to receive
$10.00 for each outstanding share,

         (ii) holders of Common Stock shall be entitled to receive $10.00 for
each outstanding share of Common Stock,

         (iii) holders of Convertible Preferred Stock and Common Stock shall be
entitled to receive an amount such that, including such amounts distributed in
(i) and (ii) above, they have each received an amount equal to the Senior
Liquidation Preference,

         (iv) holders of Mandatorily Redeemable Senior Convertible Participating
Preferred Stock, Convertible Preferred Stock and Common Stock shall be entitled
to receive amounts such that the amount distributed in respect of each
outstanding share of Mandatorily Redeemable Senior Convertible Participating
Preferred Stock pursuant to this clause shall equal 50 percent of the amount
distributed in respect of each outstanding share of Convertible Preferred Stock
and Common Stock pursuant to this clause.

         Optional Redemption. If the Company proposes to declare and pay any
dividends or other distributions in respect of Convertible Preferred Stock or
Common Stock, the Company shall first offer to utilize such proceeds to redeem
shares of the Mandatorily Redeemable Senior Convertible Participating Preferred
Stock at a redemption price per share equal to the Senior Liquidation
Preference. Any portion not used to redeem shares of Mandatorily Redeemable
Senior Convertible Participating Preferred Stock may be utilized by the Company
to pay dividends pari passu to the holders of outstanding shares of Mandatorily
Redeemable Senior Convertible Participating Preferred Stock, Convertible
Preferred Stock and Common Stock.

         Call Option. The Company may, at its option and at any time, call for
redemption all (but not less than all) of the outstanding shares at a price per
share equal to the Senior Liquidation Preference. The holders will be provided
an opportunity to convert such shares into shares of Common Stock prior to the
redemption.

         Mandatory Redemption. The Company shall redeem all of the then
outstanding shares on December 10, 2008, at a redemption price per share equal
to the Senior Liquidation Preference.




                                       45
<PAGE>   47
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


15.      OTHER PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                            -------------------------------
                                                                                                 1998            1997
                                                                                            --------------- ---------------
                                                                                                (IN THOUSANDS OF DOLLARS)

<S>                                                                                          <C>             <C>      
        Convertible Preferred Stock:
           Series I-3,000,000 shares authorized, $0.01 par value;                             
               2,594,876 shares outstanding................................................   $      26       $      26
           Series II-1,500,000 shares authorized, $0.01 par value;                                   
               1,237,374 shares outstanding................................................          12              12
        Common Stock - 30,000,000 shares authorized, $0.01                                           
           Par value;  599,877 and 633,513 shares outstanding at
           December 31, 1998 and 1997, respectively........................................          14              14
        Additional paid-in capital.........................................................      52,382          52,305
        Treasury stock-at cost; 817,700 and 780,200 shares at                                    
           December 31, 1998 and 1997, respectively........................................      (8,887)         (8,412)
                                                                                              ---------       ---------

                Total......................................................................   $  43,547       $  43,945
                                                                                              =========       =========
</TABLE>

         In April 1993, the Company issued 1,111,250 shares of Class A Common
Stock, 56,500 shares of Class B Common Stock and 3,832,250 shares of Convertible
Preferred Stock, which consists of 2,594,876 shares of Series I Convertible
Preferred Stock and 1,237,374 shares of Series II Convertible Preferred Stock.

         In December 1993, the Company issued 165,520 shares of Class B Common
Stock and 3,615,000 shares of Mandatorily Redeemable Senior Convertible
Participating Preferred Stock, which consists of 2,680,656 shares of Series I
Mandatorily Redeemable Senior Convertible Participating Preferred Stock and
934,344 shares of Series II Mandatorily Redeemable Senior Convertible
Participating Preferred Stock (see Note 14).

         As of March 6, 1997 the Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") and by-laws of the
Company and the by-laws of National, as the case may be, were amended to: (i)
eliminate the supermajority voting requirements of the Company's stockholders
and the Company's and National's boards of directors that were applicable to
certain actions taken with respect to the Company or National, (ii) eliminate
all designations of classes of common stock, the convertibility of one class of
common stock into another and all class votes of holders of common stock, (iii)
change the names of the Class A Common Stock and the Class B Common Stock to
Common Stock, (iv) provide that all of the outstanding shares of preferred stock
of the Company be convertible into Common Stock on the same basis as they
previously had been into Class B Common Stock, and (v) eliminate class votes for
Directors of the Company and to provide that Directors will be elected by
holders of Common Stock and Series I Preferred Stock voting together as a single
class.

         During the years ended December 31, 1998, 1997 and 1996 the Company
issued 3,864; 35,339 and 5,152, respectively, shares of Common Stock to certain
members of management for cash and notes receivable (see Note 7)
aggregating $77,000, $655,000 and $77,000, respectively.

CONVERTIBLE PREFERRED STOCK

         Voting Rights. Each share of Series I Convertible Preferred Stock
entitles the holder to one vote on all matters submitted to a vote of the
Company's stockholders. Series II Convertible Preferred Stock is non-voting.



                                       46
<PAGE>   48
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         Dividends. See Common Stock-Dividends below.

         Conversion. Each share of Series I Convertible Preferred Stock is
convertible into a share of Common Stock at any time at the option of the
holder.


         Each share of Series II Convertible Preferred Stock is convertible at
any time at the option of the holder into such number of shares of Common Stock
that in the aggregate do not exceed the lesser of (i) one share of Common Stock
for each share of Series II Convertible Preferred Stock converted or (ii) the
number that equals 25 percent of the outstanding shares of Common Stock
immediately following such conversion (a total of 199,959 at December 31, 1998
for all Series II preferred shares). Following the conversion of at least 75
percent of the outstanding Convertible Preferred Stock into Common Stock, the
Company is entitled to convert each remaining share of Convertible Preferred
Stock into a share of Common Stock.

         Liquidation Preference. See Note 14 - Liquidation Preference above.

COMMON STOCK

         Voting Rights. Each share of Common Stock entitles the holder to one
vote on all matters submitted to a vote of the Company's stockholders.

         Dividends. Holders of Common Stock are entitled to receive dividends
if, and when, declared by the Board of Directors of the Company. The Company is
precluded from paying dividends or making distributions to the holders of any of
its equity securities while any shares of Convertible Preferred Stock or
Mandatorily Redeemable Senior Convertible Participating Preferred Stock are
outstanding except for dividends and distributions of capital stock of the
Company; unless (i) in any fiscal year the dividends and distributions do not
exceed 50 percent of the Company's net income for the prior fiscal year and (ii)
if immediately after payment of such dividends or the making of any such
distributions, the value of the Company's stockholder equity would exceed the
value of the aggregate liquidation preference of the outstanding shares of
Convertible Preferred Stock and Mandatorily Redeemable Senior Convertible
Participating Preferred Stock by at least one dollar.

         Liquidation Preference. See Note 14 - Liquidation Preference above.

         Warrants. In April 1993 the Company issued warrants with an exercise
price of $0.01 per share which are exercisable for 128,206 shares of Common
Stock.

         Repurchase Rights. Certain members of the Company's senior management
have purchased shares of the Company's Common Stock pursuant to individual
management subscription agreements. The Company has the right to repurchase, and
the employees have the right to require the Company to repurchase, at formula
prices, the Common Stock upon termination of employment. The formula prices are
based on the consolidated operating results and indebtedness of the Company. At
December 31, 1998, 1997 and 1996, the formula prices were $25.00, $23.25 and
$15.69 per share. Compensation expense recognized with regard to these shares
during the years ended December 31, 1998, 1997 and 1996 were $62,000, $54,000
and $336,000, respectively.




                                       47
<PAGE>   49
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


TREASURY STOCK

         From time to time the Company has acquired shares of its Common Stock
from former members of management and Operator Stockholders. For the years ended
December 31,1998, 1997 and 1996, the Company purchased 37,500; 692,000 and
75,000 treasury shares, respectively. These shares were recorded at their
acquisition costs of $475,000, $7,456,000 and $751,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.

STOCK AWARD AND OPTION PLANS

         1997 Stock Plan. During 1997, the Board of Directors approved the
adoption of the 1997 Stock Plan (the "1997 Plan"). The principal terms and
conditions of the 1997 Stock Plan are as follows: a maximum of 750,000 shares of
Common Stock (subject to adjustment) may be issued pursuant to options and stock
appreciation rights granted to officers, non-employee directors and key
employees of the Company designated by the Compensation Committee; the option
exercise price for each option granted will be the stated market value of the
stock on the respective grant date, such stated market value to be determined
annually based on a formula, specified in the 1997 Stock Plan, that is, based on
the consolidated operating results and indebtedness of the Company; the options
will vest on the December 31 of the year of grant upon the attainment of
performance targets (outstanding options and options with respect to shares
reserved for future awards will vest upon a "change of control" or "initial
public offering" of the Company (as such terms are defined in the 1997 Stock
Plan)), and remain exercisable for limited periods following termination of
employment; shares of Common Stock acquired upon exercise of options are subject
to call and put options upon termination of employment; if a change of control
occurs within six months after termination of the employment of a former
employee for "good reason," death, "disability" or termination other than for
"cause" (as defined), an adjustment will be made to the amount paid upon
exercise of any call options or put options (but, in the case of put options,
only to the extent the proceeds received by the former employee upon exercise of
the put option are used to repay indebtedness to the Company) so that the former
employee will be able to receive any amounts in excess of the call or put price
payable in the change of control transaction.

         1993 Stock Plan. The 1993 Stock Incentive Plan (the "1993 Stock Plan")
was approved by the Board of Directors and was effective as of December 10,
1993. The 1993 Stock Plan provided for the granting of stock options and other
stock-based awards to employees and directors of the Company. Stock awards
granted under the 1993 Stock Plan could be in the form of (i) stock options,
(ii) stock appreciation rights related to an option ("SAR"), and (iii) unrelated
SAR's. Stock options granted under the 1993 Stock Plan allow the purchase of
Common Stock (formerly Class B Common Stock) at prices generally not less than
fair market value as determined by the Compensation Committee of the Board of
Directors. The total number of shares of Common Stock with respect to which
awards could be granted was 572,000. Common stock obtained as a result of the
exercise of the options is subject to call and put rights at formula prices upon
termination of employment. The formula prices are based on the consolidated
operating results and indebtedness of the Company. A portion of the options
vested at the end of each year in the five year period ending December 31, 1997,
based on attainment of certain specified financial objectives at the end of each
year, but no more quickly than ratably from the date of grant through December
31, 1996. Vested options must be exercised within 10 years of the date of grant.
All unvested options under the 1993 Plan at December 31, 1996 were cancelled
upon the adoption of the 1997 Stock Plan.

         The purchase prices at December 31, 1998, 1997 and 1996 used to
determine compensation expense related to options granted under the Company's
stock plans were $25.00, $23.25 and $15.69, respectively. Based on these prices
and the number of vested options in each year, compensation expense recognized
in relation to these options for the years ended December 31, 1998, 1997 and
1996 were $2,438,000, $1,346,000, and $331,000, respectively.



                                       48
<PAGE>   50
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         The following table reflects the status and activity of options under
the 1997 Stock Plan and the 1993 Stock Plan:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                            ---------------------------------------------
                                                                1998            1997            1996
                                                           --------------- --------------- ---------------

<S>                                                             <C>             <C>             <C>    
 Options outstanding, beginning of year....................     376,779         531,181         520,181
    Granted................................................     161,750         161,750          11,000
    Canceled...............................................           -        (316,152)              -
                                                             ----------        --------      ----------

 Options outstanding, end of year..........................     538,529         376,779         531,181
                                                             ==========      ==========      ==========
 Options exercisable, end of year..........................     538,529         376,779         330,436
 Options available for grant, end of year..................     426,500         588,250          40,819
</TABLE>

         The weighted-average exercise price was $23.25 and $20.00 for those
options granted during 1998 and 1997, respectively, and $19.74 and $18.27 for
all outstanding options as of December 31, 1998 and 1997, respectively. The
weighted-average exercise price of the options cancelled in 1997, the options
granted in 1996 and all outstanding options as of December 31, 1996, was $19.04.

         The following table summarizes information about options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
 EXERCISE                                                                 OPTIONS           OPTIONS
 PRICE                                                                  OUTSTANDING       EXERCISABLE
 -----                                                                  -----------       ----------
<S>                                                                         <C>              <C>   
 $10.00............................................................          67,988           67,988
 $17.49............................................................          71,757           71,757
 $20.00............................................................         161,750          161,750
 $22.50............................................................          75,284           75,284
 $23.25............................................................         161,750          161,750
                                                                        -----------       ----------
                                                                            538,529          538,529
                                                                        ===========       ==========
</TABLE>

         The weighted-average remaining contractual life of all options
outstanding at December 31, 1998 was 7.4 years.




                                       49
<PAGE>   51
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


16.      INCOME TAXES

         The (benefit) provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------------
                                                                1998            1997            1996
                                                           --------------- --------------- --------------
                                                                       (IN THOUSANDS OF DOLLARS)
<S>                                                          <C>             <C>              <C>     
        Current:
           Federal.........................................  $    4,089      $    3,524       $  2,557
           State...........................................       1,501             462            398
                                                             ----------      ----------       --------
                                                                  5,590           3,986          2,955
                                                             ----------      ----------       --------
        Deferred:
           Federal.........................................      (6,565)         (3,880)            74
           State...........................................      (1,126)           (450)           320
                                                             ----------      ----------       --------
                                                                 (7,691)         (4,330)           394
                                                             ----------      ----------       --------

                Total......................................  $   (2,101)     $     (344)      $  3,349
                                                             ==========      ==========       ========
</TABLE>

         The difference between taxes calculated at the U. S. federal statutory
tax rate of 35 percent and the Company's total income tax provision is as
follows:

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                 ----------------------------------------------
                                                                      1998           1997            1996
                                                                 ------------------------------ ---------------
                                                                           (IN THOUSANDS OF DOLLARS)

<S>                                                                <C>            <C>              <C>     
 U.S. federal statutory rate applied to income before taxes and    
    extraordinary items..........................................  $  (2,198)     $    (194)       $  3,109
 State income taxes, net of federal income tax benefit...........        243              8             467
 Non-deductible meals and entertainment..........................        129             65              80
 Adjustment of prior year estimated tax liability................          -              -            (239)
 Benefit of tax credits..........................................       (320)          (227)            (98)
 Other - net.....................................................         45              4              30
                                                                   ---------      ---------       ---------

         Total...................................................  $  (2,101)     $    (344)      $   3,349
                                                                   =========      =========       =========
</TABLE>

         For 1998, income tax benefits of $2,012,000 allocated to the
extraordinary loss of $5,917,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $59,000. This difference is due to
graduated tax rates. For 1997, income tax benefits of $3,608,000 allocated to
the extraordinary loss of $9,162,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $401,000. This difference is the result
of state tax benefits, net of the federal effect and graduated tax rates.



                                       50
<PAGE>   52
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         Deferred income tax assets and liabilities resulted from the following:

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                                -------------------------------
                                                                                     1998            1997
                                                                                -------------------------------
                                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                                                               <C>             <C>       
         Deferred tax assets:
            Accounts receivable.................................................  $    1,199      $    1,784
            Inventory...........................................................         299             245
            Organization and start-up costs.....................................           -              35
            Federal benefit of state deferred tax liabilities...................           -             518
            Intangible assets...................................................      11,511          10,358
            Deferred revenues...................................................         887             125
            Minimum tax credit..................................................       5,472           3,323
            Net operating loss carryforwards....................................           -           2,726
            General business credits (expiring 2009-2012).......................       1,561           1,077
            Other accrued liabilities...........................................       4,039           2,442
                                                                                  ----------      ----------

                 Total deferred tax assets......................................      24,968          22,633
                                                                                  ----------      ----------
         Deferred tax liabilities:
            Property and equipment..............................................     (18,480)        (23,878)
            Federal liability for state deferred tax assets.....................         (42)              -
                                                                                  ----------      ----------

                 Total deferred tax liabilities.................................     (18,522)        (23,878)
                                                                                  ----------      -----------

                 Net deferred tax assets (liabilities)..........................  $    6,446      $   (1,245)
                                                                                  ==========      ===========
</TABLE>

         The tax returns of the Company for 1995 through 1998 are subject to
examination by the Internal Revenue Service and state tax authorities. The
Company believes it has made adequate provision for income taxes and interest
that may become payable for years not yet examined.

17.      RELATED PARTY TRANSACTIONS

         Certain of the Company's stockholders have an ownership interest in one
or more of the franchisee customers to whom the Company sells fuel and certain
non-fuel products and from whom the Company receives rental income and royalty
income. The transactions with related parties are at prices and terms that are
the same as for similar transactions with unrelated entities. As of December 31,
1998, 21 of the Leased Sites were operated by related parties.



                                       51
<PAGE>   53
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         The following table is a summary of balances and transactions with
Operator Stockholders at December 31, 1998 and 1997, and for each of the three
years ended December 31, 1998:

<TABLE>
<CAPTION>
                                           DECEMBER 31,                      YEAR ENDED DECEMBER 31,
                                   ------------------------------  ---------------------------------------------
                                       1998            1997            1998           1997            1996
                                   --------------  --------------  -------------- --------------  --------------
                                                            (IN THOUSANDS OF DOLLARS)

<S>                                  <C>             <C>              <C>           <C>              <C>      
Accounts receivable...............   $  5,124        $ 7,469
Notes receivable..................   $  1,277        $   944
Fuel revenue......................                                    $ 65,786      $ 187,279        $ 269,179
Rent revenue......................                                    $  8,957      $  22,380        $  32,266
Other revenues....................                                    $  6,369      $   4,477        $   5,534
Cost of revenues..................                                    $ 64,369      $ 187,143        $ 268,343
</TABLE>
                                                                                
         During each of 1998, 1997 and 1996, the Company acquired the travel    
center businesses and operating assets of certain of its Operator Stockholders.
Total consideration paid to these operators was $1,610,000 in 1998 for one site,
$20,152,000 in 1997 for 23 sites and $3,185,000 in 1996 for five sites

         During 1997, the Company sold to certain of its Operator Stockholders
12 of its travel center facilities. Total consideration received by the Company
from these sales was $30,983,000.

         At each of December 31, 1998 and 1997, $27,000,000 of the Company's
indebtedness was owed to certain of the Company's preferred stockholders. The
interest expense incurred related to debt owed to these stockholders was
$2,414,000, $3,636,000 and $5,327,000 in 1998, 1997 and 1996, respectively.

         Certain shareholders of the Company were paid fees aggregating $400,000
as consideration for their financial advisory services provided in completing
the 1998 Refinancing.

         Certain members of the Company's senior management have purchased
common stock of the Company pursuant to management subscription agreements (see
Note 15 -Repurchase Rights). As a result of such purchases, the Company has
notes receivable from the management stockholders totaling $967,000 and $887,000
at December 31, 1998 and 1997, respectively.

18.      COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

         The Company's operations and properties are subject to extensive
regulation pursuant to federal, state and local laws, regulations and ordinances
("Environmental Laws") that (i) govern activities and operations that may have
adverse environmental effects, such as discharges to air, soil and water, as
well as handling, storage and disposal practices for petroleum products and
other hazardous and toxic substances ("Hazardous Substances") or (ii) impose
liability and damages for the costs of cleaning up sites affected by, and for
damages resulting from, past spills and disposal or other releases of Hazardous
Substances.




                                       52
<PAGE>   54
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated Sites and Leased Sites to
store petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company has made necessary upgrades to USTs to comply with federal regulations
which took effect on December 22, 1998, and believes that all of its travel
centers, including those acquired in the Burns Acquisition, are in material
compliance with applicable requirements of Environmental Laws.

         While the costs of compliance for these matters have not had a material
adverse impact on the Company, it is impossible to predict accurately the
ultimate effect these changing laws and regulations may have on the Company in
the future. The Company incurred capital expenditures, maintenance, remediation
and other environmental related costs of approximately $6,721,000, $8,867,000
and $7,172,000 in 1998, 1997 and 1996, respectively.

         The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connection therewith, will be material to the
Company's results of operation or financial condition. The Company is conducting
investigatory and/or remedial actions with respect to releases and/or spills of
Hazardous Substances that have occurred subsequent to the National Acquisition
and the TA Acquisition. While the Company cannot precisely estimate the ultimate
costs it will incur in connection with the investigation and remediation of
these matters, based on its current knowledge, the Company does not expect that
the costs to be incurred for these matters, individually or in the aggregate,
will be material to the Company's results of operation or financial condition.
While the aforementioned matters are, to the best knowledge of the Company, the
only proceedings for which the Company is currently exposed to potential
liability (particularly given the Unocal and BP indemnities discussed below),
there can be no assurance that additional contamination does not exist at these
or additional Network properties, or that material liability will not be imposed
in the future. If additional environmental problems arise or are discovered, or
if additional environmental requirements are imposed by government agencies,
increased environmental compliance or remediation expenditures may be required,
which could have a material adverse effect on the Company.

         The Company has estimated the current ranges of remediation costs at
currently active sites and what it believes will be its ultimate share for such
costs after required indemnification and remediation is performed by Unocal and
BP under the environmental agreements and has a reserve of $3,890,000, for such
matters. While it is not possible to quantify with certainty the environmental
exposure, in the opinion of management, the potential liability, beyond that
considered in the reserve, for all environmental proceedings, based on
information known to date, will not have a material adverse effect on the
financial condition, results of operations or liquidity of the Company.

         Pursuant to an environmental agreement entered into with Unocal at the
time of the National Acquisition (the "Unocal Environmental Agreement"), Unocal
is responsible for all costs incurred for remediation of environmental
contamination (the remediation must achieve compliance with the Environmental
Laws in effect on the date the remedial action is completed) and for otherwise
bringing the properties into compliance with Environmental Laws (as in effect at
the date of the National Acquisition) with respect to environmental
contamination or non-compliance identified in the Phase I or Phase II
environmental assessments conducted at each of the sites acquired from Unocal,
which environmental contamination or non-compliance existed on or prior to the
date of the National Acquisition. Under the terms of the Unocal Environmental
Agreement, Unocal also must indemnify the Company against any other
environmental liabilities that arise out of conditions at, or ownership or
operations of, the National Network prior to the date of the National
Acquisition. Pursuant to the Unocal 


                                       53
<PAGE>   55
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Environmental Agreement, Unocal is obligated to indemnify the Company for claims
made before April 14, 2004. Except as described above, Unocal does not have any
responsibility for any environmental liabilities arising out of the ownership or
operations of the National Network after the date of the National Acquisition.
There can be no assurance that, if additional environmental claims or
liabilities were to arise under the Unocal Environmental Agreement, Unocal would
not dispute the Company's claims for indemnification thereunder.

         An environmental agreement entered into with BP at the time of the TA
Acquisition (the "BP Environmental Agreement") provides that, with respect to
environmental contamination or non-compliance with Environmental Laws identified
in the Phase I or Phase II environmental assessments conducted at each of the
sites acquired from BP, BP is responsible for all costs incurred for remediation
of such environmental contamination (the remediation must achieve compliance
with the Environmental Laws in effect on the date the remedial action is
completed) and for otherwise bringing the properties into compliance with
Environmental Laws (as in effect at the date of the TA Acquisition). The BP
Environmental Agreement further provides that BP must indemnify the Company
against any other environmental liabilities that arise out of conditions at, or
ownership or operations of, the TA locations prior to the date of the TA
Acquisition. With respect to liabilities relating to the investigation and
remediation of environmental contamination, BP is obligated to indemnify the
Company for liabilities with respect to which claims are made before December
11, 2004. With respect to liabilities otherwise relating to non-compliance with
Environmental Laws (for example, equipment), BP is obligated to indemnify the
Company for liabilities with respect to which claims were made before December
11, 1996. Except as described above, BP does not have any responsibility for any
environmental liabilities arising out of the ownership or operations of the TA
Network after the date of the TA Acquisition. There can be no assurance that, if
additional environmental claims or liabilities were to arise under the BP
Environmental Agreement, BP would not dispute the Company's claims for
indemnification thereunder.

PENDING LITIGATION

         Forty-Niner Truck Plaza Litigation. In connection with the acquisition
of the National Network, the Company acquired six travel centers located in
California. In January 1993, the Operators of four of these travel centers (the
"California Plaintiffs") commenced litigation against Unocal, The Clipper Group,
L.P. ("Clipper," organizer of the institutional investor group which formed the
Company) and the Company in California state court seeking, among other things,
specific performance by Unocal of their alleged rights, either under the
California Business and Professions Code or, in the alternative, pursuant to an
alleged contract with Unocal, to purchase their travel centers at what they
alleged was a fair market price and seeking compensatory and punitive damages
against the Company and others for both tortious interference with the
California Plaintiffs' alleged rights and civil conspiracy. The four properties
operated by the California Plaintiffs are referred to herein as the "California
Properties". Two of the California Plaintiffs settled their claims prior to
commencement of the first trial, which ended with a court order for a retrial.
On September 1, 1998, one of the two remaining plaintiffs entered into a
settlement agreement with Unocal and the Company, and dismissed its claims in
the case. The retrial of this case with the one remaining plaintiff commenced on
February 16, 1999. On March 8, 1999, the trial was suspended upon the request of
all parties in order to complete negotiation of a definitive settlement
agreement, the general terms of which have been agreed to by all parties. The
effect of the proposed settlement on the Company's consolidated financial
statements is not expected to be material.

         In addition to the above matter, the Company is the subject of, or
party to, a number of pending or threatened legal actions, contingencies and
commitments involving a variety of matters, including laws and regulations
relating to the environment. The ultimate resolution of these contingencies is
not expected to be material to the Company's results of operations, financial
position or liquidity.



                                       54
<PAGE>   56
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


19.      OPERATING LEASE COMMITMENTS

         Of the 133 travel centers owned by the Company as of December 31, 1998,
30 are leased to Operators under operating lease arrangements. Of these Leased
Sites, 21 are leased to Operator Stockholders (see Note 17). The lease
agreements offered to related parties are the same as those offered to unrelated
parties. These cancelable lease arrangements generally are for terms of three to
five years. Rent revenue from such operating lease arrangements totaled
$14,271,000, $29,433,000 and $41,762,000 for 1998, 1997 and 1996, respectively.


20.      OTHER INFORMATION

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31
                                                                        ---------------------------------------------
                                                                            1998            1997           1996
                                                                        --------------  -------------- --------------
                                                                                  (IN THOUSANDS OF DOLLARS)

<S>                                                                      <C>            <C>             <C>        
 Operating and Selling, general and administrative expenses include the
    following:
    Repairs and maintenance expenses.................................... $     9,208    $     8,528     $     2,860
    Advertising expenses................................................ $     8,058    $     9,141     $     3,964
    Taxes other than payroll and income taxes........................... $     5,573    $     5,099     $     2,429
 Interest (expense), net consists of the following:
    Interest expense.................................................... $   (28,285)   $   (26,418)    $   (15,965)
    Interest income.....................................................       2,914          3,520             729
                                                                         -----------    -----------     -----------
                                                                         $   (25,371)   $   (22,898)    $   (15,236)
                                                                         ===========    ===========     ===========
</TABLE>


21.      SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31
                                                                        ----------------------------------------------
                                                                             1998           1997            1996
                                                                        ----------------------------------------------
                                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                                                         <C>            <C>             <C>     
    Cash paid during the year for:
    Interest............................................................    $ 27,804       $ 24,611        $ 16,597
    Income taxes (net of refunds).......................................    $ (1,224)      $  3,445        $  1,321
</TABLE>
                                                                                
         During 1998, 1997 and 1996 the Company received $1,068,000, $5,023,000 
and $3,207,000, respectively, of inventory and property and equipment in
liquidation of trade accounts receivable and notes receivable.

         During 1998, the Company issued a note payable for $3,044,000 (net of a
discount of $1,875,000) in exchange for property and goodwill acquired.

         Pursuant to the 1997 Refinancing, the Company extinguished $85,500,000
of Senior Secured Notes through the issuance of Series I Senior Secured Notes
and Series II Senior Secured Notes of an aggregate equal face amount.




                                       55
<PAGE>   57
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


22.      UNAUDITED PRO FORMA PRESENTATION

         The following schedule sets forth the consolidated results of
operations of the Company as though TAHC had not been held for disposition and
instead been fully consolidated since January 1, 1994. Amounts are shown only
for the year ended December 31, 1996, as TAHC and TA were fully consolidated for
the entire year for each of the years ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                                            YEAR ENDED
                                                                                           DECEMBER 31,
                                                                                               1996
                                                                                    ---------------------------
                                                                                     (IN THOUSANDS OF DOLLARS)
<S>                                                                                          <C>        
     Revenues:
        Fuel........................................................................         $   752,266
        Nonfuel.....................................................................             236,780
        Rent and royalties..........................................................              47,437
                                                                                             -----------
           Total revenues...........................................................           1,036,483
     Cost of revenues (excluding depreciation)......................................             803,535
                                                                                             -----------
     Gross profit (excluding depreciation)..........................................             232,948
     Operating expenses.............................................................             129,447
     Selling, general and administrative expenses...................................              42,811
     Refinancing, transition and development costs..................................               2,687
     Depreciation and amortization..................................................              26,970
     (Gain) loss on sales of property and equipment                                                1,464
     Other (income) expense, net....................................................                (140)
                                                                                             -----------
        Income from operations......................................................              29,709
     Interest income (expense), net.................................................             (20,827)
                                                                                             -----------
        Income before provision for income taxes....................................               8,882
     Provision for income taxes.....................................................               3,349
                                                                                             -----------
        Net income..................................................................         $     5,533
                                                                                             ===========
</TABLE>


23.     CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES

         The following schedules set forth the condensed consolidating balance
sheet schedules of the Company as of December 31, 1998 and 1997 and condensed
consolidating statement of income and retained earnings schedules and condensed
consolidating statement of cash flows schedules of the Company for the years
ended December 31, 1998, 1997 and 1996. In the following schedules, "Parent
Company" refers to the unconsolidated balances of TravelCenters of America,
Inc., "Guarantor Subsidiaries" refers to the combined unconsolidated balances of
TA and National, and "Nonguarantor Subsidiary" refers to the balances of TAFSI.
"Eliminations" represent the adjustments necessary to (a) eliminate intercompany
transactions, (b) eliminate the Company's investments in its subsidiaries and
(c) present TAHC as a subsidiary held for disposition until September 30, 1996
(see Note 2).

         The Guarantor Subsidiaries, TA and National, are wholly-owned
subsidiaries of the Company and have fully and unconditionally, jointly and
severally, guaranteed the Company's indebtedness. In the 10-K filing, the
Company has not presented separate financial statements and other disclosures
concerning the Guarantor Subsidiaries because management has determined such
information is not material to investors.




                                       56
<PAGE>   58
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31, 1998
                                            -----------------------------------------------------------------------------
                                                PARENT       GUARANTOR      NONGUARANTOR   
                                               COMPANY      SUBSIDIARIES     SUBSIDIARY    ELIMINATIONS    CONSOLIDATED
                                            ------------------------------ -------------- --------------- ---------------
                                                                     (IN THOUSANDS OF DOLLARS)

<S>                                           <C>            <C>             <C>           <C>              <C>       
 Current assets:
    Cash..................................    $   59,665     $   29,535      $        -    $         -      $   89,200
    Accounts receivable, net..............             -         60,176             836              -          61,012
    Inventories...........................             -         42,952               -              -          42,952
    Deferred income taxes.................             -          4,459               -              -           4,459
    Other current assets..................        98,323         29,210           7,860       (122,774)         12,619
                                              ----------     ----------      ----------    -----------      ----------
         Total current assets.............       157,988        166,332           8,696       (122,774)        210,242
 Notes receivable, net....................           967            272               -              -           1,239
 Property and equipment, net..............             -        361,803               -              -         361,803
 Intangible assets........................             -         21,141               -              -          21,141
 Deferred financing costs.................         9,284              -               -              -           9,284
 Deferred income taxes....................           879          2,045               -              -           2,924
 Other assets.............................           730          6,398               -         (3,700)          3,428
 Investment in subsidiaries...............       338,205              -               -       (338,205)              -
                                              ----------     ----------      ----------    -----------      ----------
         Total assets.....................    $  508,053     $  557,991      $    8,696    $  (464,679)     $  610,061
                                              ==========     ==========      ==========    ===========      ==========

 LIABILITIES AND STOCKHOLDERS' EQUITY 
 Current liabilities:
    Current maturities of long-term debt..    $    1,446     $      148      $        -    $         -      $    1,594
    Accounts payable......................             -         20,908               7              -          20,915
    Other accrued liabilities.............        18,988        189,022           2,916       (122,761)         88,165
                                              ----------     ----------      ----------    -----------      ----------
         Total current liabilities........        20,434        210,078           2,923       (122,761)        110,674
 Long-term debt (net of unamortized              
    discount).............................       387,942          2,923               -              -         390,865
 Deferred income taxes....................             -            937               -              -             937
 Other liabilities........................             -        232,566               -       (223,404)          9,162
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities................       408,376        446,504           2,923       (346,165)        511,638
 Mandatorily redeemable senior convertible        
    participating preferred stock.........        69,974              -               -              -          69,974
 Other preferred stock, common stock and          
    other stockholders' equity............        44,801         84,880               -        (86,134)         43,547
 Retained earnings........................       (15,098)        26,607           5,773        (32,380)        (15,098)
                                              ----------     ----------      ----------    -----------      ----------
                                                  29,703        111,487           5,773       (118,514)         28,449
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities and                
            stockholders' equity..........    $  508,053     $  557,991      $    8,696    $  (464,679)     $  610,061
                                              ==========     ==========      ==========    ===========      ==========
</TABLE>




                                       57
<PAGE>   59
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                         DECEMBER 31, 1997
                                            -----------------------------------------------------------------------------
                                                PARENT       GUARANTOR      NONGUARANTOR   
                                               COMPANY      SUBSIDIARIES     SUBSIDIARY    ELIMINATIONS    CONSOLIDATED
                                            ------------------------------ -------------- --------------- ---------------
                                                                     (IN THOUSANDS OF DOLLARS)

<S>                                           <C>            <C>             <C>           <C>              <C>       
 Current assets:
    Cash..................................    $   59,592     $   12,164      $      -      $         -      $   71,756
    Accounts receivable, net..............             -         67,927             506              -          68,433
    Inventories...........................             -         33,718               -              -          33,718
    Deferred income taxes.................             -          3,740               -              -           3,740
    Other current assets..................        14,176         38,971           2,591        (45,482)         10,256
                                              ----------     ----------      ----------    -----------      ----------
         Total current assets.............        73,768        156,520           3,097        (45,482)        187,903
 Notes receivable, net....................           887            805               -              -           1,692
 Property and equipment, net..............             -        286,472               -              -         286,472
 Intangible assets........................             -         15,651               -              -          15,651
 Deferred financing costs.................        11,786              -               -              -          11,786
 Other assets.............................           730          3,558               -              -           4,288
 Investment in subsidiaries...............       342,860              -               -       (342,860)              -
                                              ----------     ----------      ----------    -----------      ----------
         Total assets.....................    $  430,031     $  463,006      $    3,097    $  (388,342)     $  507,792
                                              ==========     ==========      ==========    ===========      ==========

 LIABILITIES AND STOCKHOLDERS' EQUITY 
 Current liabilities:
    Current maturities of long-term debt..    $      500     $        -      $        -     $        -      $      500
    Accounts payable......................             -         29,387               -           (352)         29,035
    Other accrued liabilities.............        32,601         83,905             889        (45,130)         72,265
                                              ----------     ----------      ----------    -----------      ----------
         Total current liabilities........        33,101        113,292             889        (45,482)        101,800
 Long-term debt (net of unamortized              
    discount).............................       289,625              -               -              -         289,625
 Deferred income taxes....................          (852)         5,837               -              -           4,985
 Other liabilities........................             -        230,371               -       (225,892)          4,479
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities................       321,874        349,500             889       (271,374)        400,889
 Mandatorily redeemable senior convertible        
    participating preferred stock.........        61,404              -               -              -          61,404
 Other preferred stock, common stock and          
    other stockholders' equity............        45,199         81,179               -        (82,433)         43,945
 Retained earnings........................         1,554         32,327           2,208        (34,535)          1,554
                                              ----------     ----------      ----------    -----------      ----------
                                                  46,753        113,506           2,208       (116,968)         45,499
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities and                
            stockholders' equity..........    $  430,031     $  463,006      $    3,097    $  (388,342)     $  507,792
                                              ==========     ==========      ==========   =============     ==========
</TABLE>




                                       58
<PAGE>   60
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS SCHEDULES:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31, 1998
                                            -------------------------------------------------------------------------
                                               PARENT        GUARANTOR    NONGUARANTOR   
                                               COMPANY     SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS  CONSOLIDATED
                                            -------------- -------------- -------------- ----------------------------
                                                                   (IN THOUSANDS OF DOLLARS)

<S>                                           <C>            <C>            <C>           <C>            <C>       
 Revenues:
    Fuel...................................   $        -     $  554,735     $        -    $        -     $  554,735
    Nonfuel................................            -        346,504          1,257          (230)       347,531
    Rent and royalties.....................            -         32,949          6,875       (18,280)        21,544
                                              ----------     ----------     ----------    ----------     ----------
    Total revenues.........................            -        934,188          8,132       (18,510)       923,810
 Cost of revenues (excluding depreciation).            -        627,149              -             -        627,149
                                              ----------     ----------     ----------    ----------     ----------
 Gross profit (excluding depreciation).....            -        307,039          8,132       (18,510)       296,661

 Operating expenses........................          160        212,530          1,571       (18,510)       195,751
 Selling, general and                                
     Administrative........................          829         32,556            871             -         34,256
 Transition expense........................            -          3,648              -             -          3,648
 Depreciation and amortization.............        1,482         43,180              -             -         44,662
 (Gain) loss on sale of property and                   
    equipment..............................            -         (1,195)             -             -         (1,195)
 Stock compensation expense................            -          2,500              -             -          2,500
 Other operating (income) expense, net.....            -         (2,054)             -             -         (2,054)
                                              ----------     ----------     ----------    ----------     -----------
 Income (loss) from operations.............       (2,471)        15,874          5,690             -         19,093
 Interest (expense), net...................            -        (25,368)            (3)            -        (25,371)
 Equity income (loss)......................       (2,155)             -              -         2,155              -
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before income taxes and            
    extraordinary items....................       (4,626)        (9,494)         5,687         2,155         (6,278)
 (Benefit) provision for income taxes......         (449)        (3,774)         2,122             -         (2,101)
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before extraordinary item          (4,177)        (5,720)         3,565         2,155         (4,177)
 Extraordinary loss (less applicable income       
    tax benefit)...........................       (3,905)             -              -             -         (3,905)
                                              ----------     ----------     ----------    ----------     ----------
 Net (loss) income.........................       (8,082)        (5,720)         3,565         2,155         (8,082)

 Less: preferred dividends.................       (8,570)             -              -             -         (8,570)
 Retained earnings (deficit) - beginning of        
    the year...............................        1,554         32,327          2,208       (34,535)         1,554
                                              ----------     ----------     ----------    ----------     ----------
 Retained earnings (deficit) - end of the     
    year...................................   $  (15,098)    $   26,607     $    5,773    $  (32,380)    $  (15,098)
                                              ==========     ==========     ==========    ==========     ==========
</TABLE>



                                       59
<PAGE>   61
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31, 1997
                                            -------------------------------------------------------------------------
                                               PARENT        GUARANTOR    NONGUARANTOR   
                                               COMPANY     SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS   CONSOLIDATED
                                            -------------- -------------- -------------- ------------- --------------
                                                                   (IN THOUSANDS OF DOLLARS)

<S>                                           <C>            <C>            <C>           <C>            <C>       
 Revenues:
    Fuel...................................   $        -     $  715,852     $        -    $   (7,215)    $  708,637
    Nonfuel................................            -        293,874              7           (38)       293,843
    Rent and royalties.....................            -         41,656          3,414        (8,222)        36,848
                                              ----------     ----------     ----------    ----------     ----------
    Total revenues.........................            -      1,051,382          3,421       (15,475)    1,039,328
 Cost of revenues (excluding depreciation).            -        780,299                       (7,215)       773,084
                                              ----------     ----------     ----------    ----------     ----------
 Gross profit (excluding depreciation).....            -        271,083          3,421        (8,260)       266,244

 Operating expenses........................            -        176,350            244        (8,260)       168,334
 Selling, general and                                
     Administrative........................          814         33,934            871             -         35,619
 Refinancing, transition and development               
    costs..................................            -         14,961            251             -         15,212
 Depreciation and amortization.............        1,119         34,721              -             -         35,840
 (Gain) loss on sale of property and                   
    equipment..............................            -        (11,244)             -             -        (11,244)
 Stock compensation expense................            -          1,400              -             -          1,400
 Other operating (income) expense, net.....            -         (1,262)             -             -         (1,262)
                                              ----------     ----------     ----------    ----------     ----------
 Income (loss) from operations.............       (1,933)        22,223          2,055             -         22,345
 Interest (expense), net...................       (2,629)       (20,269)             -             -        (22,898)
 Equity income (loss)......................       (5,153)             -              -         5,153              -
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before income taxes and            
    extraordinary items....................       (9,715)         1,954          2,055         5,153           (553)
 (Benefit) provision for income taxes......       (3,952)           509            802         2,297           (344)
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before extraordinary item...       (5,763)         1,445          1,253         2,856           (209)
 Extraordinary loss (less applicable income            
    tax benefit)...........................            -         (5,554)             -             -         (5,554)
                                              ----------     ----------     ----------    ----------     ----------
 Net (loss) income.........................       (5,763)        (4,109)         1,253         2,856         (5,763)

 Less: preferred dividends.................       (7,520)             -              -             -         (7,520)
 Retained earnings (deficit) - beginning of       
    the year...............................       14,837         36,436            955       (37,391)        14,837
                                              ----------     ----------     ----------    ----------     ----------
 Retained earnings (deficit) - end of the     
    year...................................   $    1,554     $   32,327     $    2,208    $  (34,535)    $    1,554
                                              ==========     ==========     ==========    ==========     ==========
</TABLE>





                                       60
<PAGE>   62

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31, 1996
                                             -------------------------------------------------------------------------
                                                PARENT        GUARANTOR    NONGUARANTOR   
                                                COMPANY     SUBSIDIARIES    SUBSIDIARY     ELIMINATIONS  CONSOLIDATED
                                             -------------- -------------- -------------- ------------- ---------------
                                                                    (IN THOUSANDS OF DOLLARS)

<S>                                            <C>            <C>            <C>            <C>            <C>       
 Revenues:
    Fuel.....................................  $        -     $  752,266     $        -     $ (202,054)    $  550,212
    Nonfuel..................................           -        237,124              -       (137,133)        99,991
    Rent and royalties.......................           -         45,711          1,382         (1,038)        46,055
                                               ----------     ----------     ----------     ----------     ----------
    Total revenues...........................           -      1,035,101          1,382       (340,225)       696,258
 Cost of revenues (excluding depreciation)...           -        802,133              -       (233,439)       568,694
                                               ----------     ----------     ----------     ----------     ----------
 Gross profit (excluding depreciation)                  -        232,968          1,382       (106,786)       127,564

 Operating expenses..........................           -        130,849              -        (74,772)        56,077
 Selling, general and administrative.........         736         41,075          1,000        (11,546)        31,265
 Refinancing, transition and development                
    costs....................................           -          2,687              -           (490)         2,197
 Depreciation and amortization...............           -         26,970              -         (9,132)        17,838
 (Gain) loss on sales of property and                   
    equipment................................           -          1,469              -             (5)         1,464
 Stock compensation expense..................           -            667              -              -            667
 Other operating (income) expense, net.......           -           (812)             -              5           (807)
 Income of subsidiary held for disposition...           -              -              -         (5,255)        (5,255)
                                               ----------     ----------     ----------     ----------     ----------
 Income from operations......................        (736)        30,063            382         (5,591)        24,118
 Interest (expense), net.....................           -        (20,827)             -          5,591        (15,236)
 Equity income (loss)........................       9,618              -              -         (9,618)             -
                                               ----------     ----------     ----------     ----------     ----------
 Income before provision for income taxes....       8,882          9,236            382         (9,618)         8,882
 Provision for income taxes..................       3,349          3,410            138         (3,548)         3,349
                                               ----------     ----------     ----------     ----------     ----------
 Net income..................................       5,533          5,826            244         (6,070)         5,533

 Less: preferred dividends...................      (6,599)             -              -              -         (6,599)
 Retained earnings (deficit) - beginning of        
    the year.................................      15,903         30,610            711        (31,321)        15,903
                                               ----------     ----------     ----------     ----------     ----------
 Retained earnings (deficit) - end of the      
    year.....................................  $   14,837     $   36,436     $      955     $  (37,391)    $   14,837
                                               ==========     ==========     ==========     ===========    ==========
</TABLE>




                                       61
<PAGE>   63
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31, 1998
                                           -------------------------------------------------------------------------
                                              PARENT        GUARANTOR    NONGUARANTOR  
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS   CONSOLIDATED
                                           -------------- -------------- ------------- -------------- --------------
                                                                  (IN THOUSANDS OF DOLLARS)

<S>                                          <C>            <C>            <C>           <C>            <C>       
 CASH FLOWS (USED IN) PROVIDED BY            
    OPERATING ACTIVITIES:                    $   (2,396)    $   50,917     $        -    $        -     $   48,521
                                             ----------     ----------     ----------    ----------     ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisitions of network assets........            -        (63,215)             -             -        (63,215)
    Proceeds from sales of property and               
       equipment..........................            -          3,414              -             -          3,414
    Capital expenditures..................            -        (65,704)             -             -        (65,704)
                                             ----------     ----------     ----------    ----------     ----------
       Net cash used in investing                     
         activities.......................            -       (125,505)             -             -       (125,505)
                                             ----------     ----------     ----------    ----------     ----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Long-term debt borrowings.............      229,250              -              -             -        229,250
    Long-term debt repayments.............     (129,987)             -              -             -       (129,987)
    Repurchase of common stock............         (475)             -              -             -           (475)
    Debt issuance costs...................       (4,360)             -              -             -         (4,360)
    Intercompany advances.................      (91,959)        91,959              -             -              -
                                             ----------     ----------     ----------    ----------     ----------
       Net cash (used in) provided by             
         financing activities.............        2,469         91,959              -             -         94,428
                                             ----------     ----------     ----------    ----------     ----------
         Net increase in cash.............           73         17,371              -             -         17,444
 Cash at the beginning of the year........       59,592         12,164              -             -         71,756
                                             ----------     ----------     ----------    ----------     ----------
 Cash at the end of the year..............   $   59,665     $   29,535     $        -    $        -     $   89,200
                                             ==========     ==========     ==========    ==========     ==========
</TABLE>



                                       62
<PAGE>   64
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31, 1997
                                           -------------------------------------------------------------------------
                                              PARENT        GUARANTOR    NONGUARANTOR  
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY   ELIMINATIONS   CONSOLIDATED
                                           -------------- -------------- ------------- --------------- -------------
                                                                  (IN THOUSANDS OF DOLLARS)

<S>                                          <C>            <C>            <C>           <C>            <C>       
 CASH FLOWS (USED IN) PROVIDED BY            
    OPERATING ACTIVITIES:                    $   13,898     $   27,772     $        -    $        -     $   41,670
                                             ----------     ----------     ----------    ----------     ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisitions of network assets........            -        (15,127)             -             -        (15,127)
    Proceeds from sales of property and               
       equipment..........................            -         37,958              -             -         37,958
    Capital expenditures..................            -        (60,818)             -             -        (60,818)
                                             ----------     -----------    ----------    ----------     ----------
       Net cash used in investing                     
         activities.......................            -        (37,987)             -             -        (37,987)
                                             ----------     ----------     ----------    ----------     ----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............            -          3,750              -             -          3,750
    Revolving loan repayments.............            -        (17,750)             -             -        (17,750)
    Long-term debt borrowings.............      205,000              -              -             -        205,000
    Long-term debt repayments.............         (375)      (126,300)             -             -       (126,675)
    Proceeds from issuance of stock.......          329              -              -             -            329
    Repurchase of common stock............       (7,456)             -              -             -         (7,456)
    Debt issuance costs...................      (12,904)             -              -             -        (12,904)
    Intercompany advances.................     (138,900)       138,900              -             -              -
                                             ----------     ----------     ----------    ----------     ----------
       Net cash (used in) provided by            
         financing activities.............       45,694         (1,400)             -             -         44,294
                                             ----------     ----------     ----------    ----------     ----------
         Net increase (decrease) in cash..       59,592        (11,615)             -             -         47,977
 Cash at the beginning of the year........            -         23,779              -             -         23,779
                                             ----------     ----------     ----------    ----------     ----------
 Cash at the end of the year..............   $   59,592     $   12,164              -    $        -     $   71,756
                                             ==========     ==========     ==========    ==========     ==========
</TABLE>







                                       63
<PAGE>   65
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31, 1996
                                           --------------------------------------------------------------------------
                                              PARENT        GUARANTOR    NONGUARANTOR  
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY   ELIMINATIONS   CONSOLIDATED
                                           -------------- -------------- ------------ --------------- --------------
                                                                  (IN THOUSANDS OF DOLLARS)

<S>                                         <C>            <C>            <C>           <C>            <C>        
 CASH FLOWS (USED IN) PROVIDED BY           
    OPERATING ACTIVITIES:                   $       712    $    38,763    $        -    $   (11,855)   $    27,620
                                            -----------    -----------    -----------   -----------    -----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisitions of network assets........            -         (2,352)             -             -         (2,352)
    Proceeds from sales of property and               
       equipment..........................            -            965              -          (322)           643
    Capital expenditures..................            -        (27,089)             -         6,544        (20,545)
                                            -----------    -----------    -----------   -----------    -----------
       Net cash used in investing                     
         activities.......................            -        (28,476)             -         6,222        (22,254)
                                            -----------    -----------    -----------   -----------    -----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............            -         14,000              -             -         14,000
    Long-term debt repayments.............            -        (16,125)             -         3,750        (12,375)
    Reconsolidation of subsidiary                     
       previously held for disposition....            -              -              -        14,309         14,309
    Other.................................         (712)             -              -             -           (712)
                                            -----------    -----------    -----------   -----------    -----------
       Net cash (used in) provided by              
         financing activities.............         (712)        (2,125)             -        18,059         15,222
                                            ------------   -----------    -----------   -----------    -----------
         Net increase in cash.............            -          8,162              -        12,426         20,588
 Cash at the beginning of the year........            -         15,617              -       (12,426)         3,191
                                            -----------    -----------    -----------   -----------    -----------
 Cash at the end of the year..............  $         -    $    23,779    $         -   $        -     $    23,779
                                            ===========    ===========    ===========   ===========    ===========
</TABLE>




                                       64
<PAGE>   66


QUARTERLY FINANCIAL DATA - UNAUDITED

<TABLE>
<CAPTION>
                                                          FIRST          SECOND          THIRD           FOURTH
                                                         QUARTER        QUARTER         QUARTER        QUARTER(A)
                                                     ------------------------------- --------------- ---------------
                                                           (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

<S>                                                    <C>             <C>             <C>             <C>        
1998 Data:
     Total Revenue                                     $   213,324     $   229,537     $   238,335     $   242,614
     Gross Profit                                      $    66,174     $    72,164     $    78,975     $    79,348
     Income (loss) before extraordinary item           $    (7,283)    $       678     $     2,387     $        41
     Net income (loss)                                 $    (7,283)    $       678     $     2,387     $    (3,864)
     Earnings per common share: 
         Income (loss) before extraordinary item:
              Basic                                    $   (14.97)     $    (2.34)     $     0.29      $    (3.63)
              Diluted                                  $   (14.97)     $    (2.34)     $     0.05      $    (3.63)
         Net income (loss):
              Basic                                    $   (14.97)     $    (2.34)     $     0.29      $   (10.16)
              Diluted                                  $   (14.97)     $    (2.34)     $     0.05      $   (10.16)

1997 Data:
     Total Revenue                                     $   265,113     $   264,877     $   250,312     $   259,026
     Gross Profit                                      $    59,235     $    66,066     $    69,775     $    71,168
     Income (loss) before extraordinary item           $      (106)    $    (2,798)    $     4,858     $    (2,163)
     Net income (loss)                                 $    (5,660)    $    (2,798)    $     4,858     $    (2,163)
     Earnings per common share: 
         Income (loss) before extraordinary item:
              Basic                                    $    (1.56)     $    (4.13)     $     2.93      $    (5.52)
              Diluted                                  $    (1.56)     $    (4.13)     $     0.64      $    (5.52)
         Net income (loss):
              Basic                                    $    (6.07)     $    (4.13)     $     2.93      $    (5.52)
              Diluted                                  $    (6.07)     $    (4.13)     $     0.64      $    (5.52)
</TABLE>


(a)  In the fourth quarter of 1998, the Company recognized an extraordinary
     loss, net of the applicable income tax benefit of $2,012,000, of $3,905,000
     with respect to the early extinguishment of indebtedness. In the fourth
     quarter of 1997, the Company recognized impairment charges of an aggregate
     amount of $7,500,000. In addition, transition expenses of $4,254,000 were
     incurred in the 1997 fourth quarter.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         Not applicable.



                                       65
<PAGE>   67


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information concerning the directors and executive officers of the
Company required by this item is incorporated by reference to the material
appearing under the heading "Directors and Officers of the Registrant" in
Exhibit 99.1 to this Report.

ITEM 11.  EXECUTIVE COMPENSATION

         Information concerning executive compensation required by this item is
incorporated by reference to the material appearing under the heading "Executive
Compensation" in Exhibit 99.1 to this Report.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information concerning security ownership of certain beneficial owners
and management of the Company required by this item is incorporated by reference
to the material appearing under the heading "Security Ownership of Certain
Beneficial Owners and Management" in Exhibit 99.1 to this Report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information concerning certain relationships and related transactions
required by this item is incorporated by reference to the material appearing
under the heading "Certain Relationships and Related Transactions" in Exhibit
99.1 to this Report.




                                       66
<PAGE>   68


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

A.       Documents filed as part of this report:

         1.    Financial Statements

         Financial statements filed as part of this report are listed in the
         Index to Consolidated Financial Statements and Supplementary Data on
         page 27.

         2.    Financial Statement Schedules

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

         3.    Exhibits

         Reference is made to the Exhibit Index set forth at page i of this
         report.

B.       Reports on Form 8-K

         On December 18, 1998, the Company filed a Form 8-K reporting its
         acquisition of substantially all of the truckstop network assets of
         Burns Bros., Inc. and affiliates as of December 3, 1998.




                                       67
<PAGE>   69











                      [This Page Intentionally Left Blank]




                                       68
<PAGE>   70


      SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
      TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
                  SECURITIES PURSUANT TO SECTION 12 OF THE ACT


         No annual report or proxy statement has been furnished to the
registrant's security holders. The registrant shall furnish to the Commission
for its information, at the time copies of such material are furnished to its
security holders, four copies of every proxy statement, form of proxy or other
proxy soliciting material sent to more than ten of the registrant's security
holders with respect to the registrant's annual meeting. The foregoing material
shall not be deemed to be "filed" with the Commission or otherwise subject to
the liabilities of Section 18 of the Act, except to the extent that the
registrant specifically incorporates it in this Form 10-K by reference.




                                       69
<PAGE>   71


                                   SIGNATURES

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

                                 TRAVELCENTERS OF AMERICA, INC.

       March 31, 1999            By:    /s/  James W. George
     --------------------           -------------------------------------------
            (Date)                  Name:  James W. George
                                    Title: Senior Vice President,
                                           Chief Financial Officer and Secretary

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

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

                                        
<S>                                     <C>                                                  <C>   
   /s/      Edwin P. Kuhn               President, Chief Executive Officer and               March 31, 1999  
   ------------------------------       Director (Principal Executive Officer)                               
       Edwin P. Kuhn                    


                                        Senior Vice President, Chief Financial                              
   /s/     James W. George              Officer and Secretary (Principal                                    
   ------------------------------       Financial Officer and Principal                      March 31, 1999 
           James W. George              Accounting Officer)


   /s/    Margaret M. Eisen             Director                                             March 31, 1999
   ------------------------------
          Margaret M. Eisen

                                        Chairman of the Board of Directors and
   /s/ Robert B. Calhoun, Jr.           Director                                             March 31, 1999
   ------------------------------
       Robert B. Calhoun, Jr.


   /s/     Eugene P. Lynch              Director                                             March 31, 1999
   ------------------------------
           Eugene P. Lynch


   /s/   Louis J. Mischianti            Director                                             March 31, 1999
   ------------------------------
         Louis J. Mischianti


   /s/      Rolf H. Towe                Director                                             March 31, 1999
   ------------------------------
            Rolf H. Towe


   /s/    Harrison T. Bubb              Director                                             March 31, 1999
   ------------------------------
          Harrison T. Bubb
</TABLE>





                                       70
<PAGE>   72







<TABLE>
<CAPTION>
                                                 EXHIBIT INDEX

  Exhibit                                             
  Number                                            Exhibit                                                   Page
-----------  -----------------------------------------------------------------------------------------------  ----
<S>           <C>                                                                                              <C>
    2.1       Asset Purchase Agreement, dated October 17, 1998, between TA and Burns Bros. Inc..............     

    2.2       Amendment to Asset Purchase Agreement, dated December 3, 1998, between TA and Burns
              Bros. Inc.....................................................................................     

    2.3       Agreement and Plan of Merger by and among the Company, TP Acquisition, Inc. and TPOA,            
              dated as of February 26, 1999.................................................................   (e)  
                                                                                                               
    2.4       Share Exchange Agreement by and among the Company and E. Philip Saunders, dated as of                 
              February 26, 1999.............................................................................   (e)  
                                                                                                               
    2.5       Voting Agreement, dated as of February 26, 1999, among the Company, TP Acquisition,                   
              Inc. and E. Philip Saunders and John M. Holohan...............................................   (e)  
                                                                                                               
    3.1       Restated Certificate of Incorporation of the Company..........................................   (a)  
                                                                                                                  
    3.2       Certificate of Amendment to the Restated Certificate of Incorporation of the Company..........   (d)
                                                                                                                  
    3.3       Restated Certificate of Incorporation of National Auto/Truckstops, Inc........................   (b)
                                                                                                                  
    3.4       Restated Certificate of Incorporation of TA Operating Corporation.............................   (b)
                                                                                                                  
    3.5       Second Amended and Restated By-laws of the Company............................................   (b)
                                                                                                                  
    3.6       Amended and Restated By-laws of National Auto/Truckstops, Inc.................................   (b)
                                                                                                                  
    3.7       Amended and Restated By-laws of TA Operating Corporation......................................   (b)
                                                                                                                 
    4.1       Indenture, dated March 27, 1997, among the Company, TA, National and Fleet National                 
              Bank as Trustee...............................................................................   (a)
                                                                                                               
    4.2       Exchange and Registration Rights Agreement, dated March 27, 1997, among the Company,                  
              the TA Subsidiary, the National Subsidiary and Chase Securities, Inc..........................   (a)  
                                                                                                               
    4.3       Form of Face of Initial Security (included in Exhibit 4.1 as Exhibit A).......................   (a)  
                                                                                                                  
    4.4       Form of Face of Exchange Security (included in Exhibit 4.1 as Exhibit B)......................   (a)
                                                                                                                  
    4.5       Supplemental Indenture, dated March 1, 1998, among the Company, TA, National, TA Travel          
              and State Street Bank and Trust Company as Trustee............................................   (b)
                                                                                                               
    9.1       Voting Trust Agreement, dated April 14, 1993, among the Company, the Voting Trustee and             
              the Operator Stockholders named therein.......................................................   (a)
                                                                                                               
    9.2       Amendment No. 1 to Voting Trust Agreement, dated November 29, 1993, among the Company,              
              the Voting Trustee and the Operator Stockholders..............................................   (a)
                                                                                                               
    9.3       Amendment No. 2 to Voting Trust Agreement, dated March 6, 1997, among the Company, the              
              Voting Trustee and the Operator Stockholders..................................................   (a)
</TABLE>
                                                                               
                                                                               
                                                                               
                                        i
<PAGE>   73


<TABLE>
<CAPTION>
   Exhibit                                                                     
   Number                                             Exhibit                                                 Page
----------  ------------------------------------------------------------------------------------------- ----------------  


<S>           <C>                                                                                             <C>
   10.1       Amended and Restated Registration Agreement among the Company, National I, National II,          
              National III, Clipper Truckstops, L.P., Clipper/Merchant, Olympus, Barclays Bank,
              Barclays, Mellon Bank, N.A. as Trustee for First Plaza, UBS, Phoenix  Insurance Company
              and Travelers dated as of December 10, 1993...................................................   (a)

   10.2*      1993 Stock Incentive Plan of the Company......................................................   (a)

   10.3*      Form of the Company's 1993 Stock Incentive Plan--Nonqualified Stock Option                       
              Agreement--National Awards....................................................................   (a)   

   10.4*      Form of the Company's 1993 Stock Incentive Plan--Nonqualified Stock Option Agreement--TA         

   10.4*      Awards .......................................................................................   (a)

   10.5       Credit Agreement, dated as of March 21, 1997, as amended and restated as of
              November 24, 1998, among the Company, the Chase Manhattan Bank as agent, fronting bank
              and swingline lender and the Lenders party thereto............................................

   10.6       Senior Note Exchange Agreement as of March 21, 1997, among the Company,  TA, National            
              and the Noteholders listed on Schedule 1 thereto..............................................   (a)

   10.7       Amendment and Waiver Agreement dated as of March 1, 1998, amending the Senior Note               
              Exchange Agreement, dated March 21, 1997......................................................   (b)

   10.8       Supplemental Agreement, dated as of November 24, 1998, amending the Senior Secured Note
              Exchange Agreement dated as of March 21, 1997 (as amended)....................................

   10.9       Stockholders' Agreement, dated as of March 6, 1996, among the Company, the voting trust          
              certificate holders named therein, the Voting Trustee, the management stockholders of
              the Company named therein, the additional stockholders named therein, Clipper, National
              I, National II, National III and Clipper/Merchant.............................................   (a)

   10.10*     Form of Executive Employment Agreement........................................................   (b)

   10.11*     Schedule of Executive Employment Agreements omitted pursuant to Instruction 2 to Item            
              601 of Regulation S-K.........................................................................   (b)

   10.12*     1997 Stock Incentive Plan of the Company......................................................   (c)

   10.13*     Form of Company's 1997 Stock Incentive Plan - Nonqualified Stock Option Agreement.............   (b)

   10.14*     Form of Management Subscription Agreement.....................................................   (b)

   10.15*     Schedule of Management Subscription Agreements omitted pursuant to Instruction 2 to
              Item 601 of Regulation S-K....................................................................

   10.16*     Form of Note..................................................................................

   10.17*     Schedule of Notes omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.............

   21         List of Subsidiaries of the Company...........................................................

   27.1       Financial Data Schedule.......................................................................

   99.1       Information Required by Part III of Form 10-K.................................................
</TABLE>

                                       ii

<PAGE>   74


(a)      Incorporated herein by reference to exhibits filed with the Company's
         Registration Statement on Form S-4 (File No. 333-26497) effective July
         17, 1997.

(b)      Incorporated by reference to exhibits filed with the Company's Annual
         Report on Form 10-K for the year ended December 31, 1997.

(c)      Incorporated herein by reference to an exhibit filed with the Company's
         Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.

(d)      Incorporated herein by reference to an exhibit filed with the Company's
         Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

(e)      Incorporated herein by reference to exhibits filed with the Company's
         Schedule 13D dated as of February 26, 1999.

*        Executive compensation plans.
























                                      iii