10-Q

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

FORM 10-Q

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

For the quarterly period ended September 30, 2002

Commission file number: 333-50437

APCOA/STANDARD PARKING, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	16-1171179 (I.R.S. Employer Identification No.)
900 N. Michigan Avenue Chicago, Illinois 60611-1542 (Address of Principal Executive Offices, Including Zip Code)
(312) 274-2000 (Registrant's Telephone Number, Including Area Code)
Former name, address and fiscal year, if changed since last report:

        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 ý    No o

        As of November 14, 2002, there were outstanding 31.3 shares of the issuer's common stock.

APCOA/STANDARD PARKING, INC.

FORM 10-Q INDEX

Part I.    Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	3
	Condensed Consolidated Statements of Operations for the three months ended September 30, 2002 and September 30, 2001 and for the nine months ended September 30,2002 and September 30, 2001.	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and September 30, 2001	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
Part II.    Other Information
Item 1.	Legal Proceedings	26
Item 6.	Exhibits and Reports on Form 8-K	26
Signatures		27
Certifications		28
Index to Exhibits

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PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

APCOA/STANDARD PARKING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data)

		September 30, 2002			December 31, 2001
		(Unaudited)			(see Note)
ASSETS
Current assets:
	Cash and cash equivalents	$	6,180		$	7,602
	Notes and accounts receivable, net		39,244			40,276
	Prepaid expenses and supplies		958			1,194
Total current assets			46,382			49,072
Leaseholds and equipment, net			21,035			18,583
Advances and deposits			1,873			1,196
Cost in excess of net assets acquired			115,689			115,332
Intangible and other assets			6,957			8,051
	Total assets	$	191,936		$	192,234
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Accounts payable	$	29,848		$	34,620
	Accrued and other current liabilities		19,261			33,054
	Current portion of long-term borrowings		3,724			1,554
	Total current liabilities		52,833			69,228
Long-term borrowings, excluding current portion			160,189			173,703
Other long-term liabilities			13,672			12,658
Senior convertible preferred stock			45,191			—
Redeemable preferred stock			54,826			61,330
Common stock subject to put/call rights; 5.01 shares issued and outstanding			9,228			8,500
Common stockholders' deficit:
	Common stock, par value $1.00 per share; 3,000 shares authorized; 26.3 shares issued and outstanding		1			1
	Additional paid-in capital		15,222			11,422
	Accumulated other comprehensive loss		(783	)		(803	)
	Accumulated deficit		(158,443	)		(143,805	)
	Total common stockholders' deficit		(144,003	)		(133,185	)
Total liabilities and stockholders' deficit		$	191,936		$	192,234

Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

See Notes to Condensed Consolidated Financial Statements.

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APCOA/STANDARD PARKING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, unaudited)

			Three Months Ended						Nine Months Ended
			September 30, 2002			September 30, 2001			September 30, 2002			September 30, 2001
Parking services revenue:
	Lease contracts		$	36,499		$	37,469		$	108,215		$	120,557
	Management contracts			18,464			21,321			58,729			62,470
				54,963			58,790			166,944			183,027
	Reimbursement of management contract expense			101,936			96,392			277,391			270,750
		Total revenue		156,899			155,182			444,335			453,777
Cost of parking services:
	Lease contracts			33,755			33,832			98,219			108,760
	Management contracts			6,935			11,784			28,157			32,628
				40,690			45,616			126,376			141,388
	Reimbursed management contract expenses			101,936			96,392			277,391			270,750
		Total cost of parking services		142,626			142,008			403,767			412,138
Gross profit				14,273			13,174			40,568			41,639
General and administrative expenses				7,351			6,153			22,547			22,769
Special charges				303			464			1,754			464
Depreciation and amortization				1,952			2,857			5,434			8,471
Management fee-parent company				750						2,250
Operating income				3,917			3,700			8,583			9,935
Interest expense (income):
	Interest expense			4,231			4,505			12,158			13,846
	Interest income			(40	)		(243	)		(139	)		(676	)
				4,191			4,262			12,019			13,170
Bad debt provision related to non-operating receivable				—			4,805			—			4,805
Loss before minority interest and income taxes				(274	)		(5,367	)		(3,436	)		(8,040	)
Minority interest				44			48			124			173
Income tax expense				104			113			353			308
Net loss				(422	)		(5,528	)		(3,913	)		(8,521	)
Preferred stock dividends				3,425			1,610			9,986			4,700
Increase in value of common stock subject to put/call rights				239			—			727			1,951
Net loss attributable to common stockholders			$	(4,086	)	$	(7,138	)	$	(14,626	)	$	(15,172	)

See Notes to Condensed Consolidated Financial Statements.

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APCOA/STANDARD PARKING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

		Nine Months Ended
		September 30, 2002			September 30, 2001
Operating activities:
Net loss		$	(3,913	)	$	(8,521	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
	Depreciation and amortization		5,434			8,471
	Non-cash interest		971			1,077
	Change in operating assets and liabilities, net of acquisitions		1,852			(3,196	)
	Net cash provided by (used in) operating activities		4,344			(2,169	)
Investing activities:
Purchase of leaseholds and equipment			(1,119	)		(1,058	)
Purchase of leaseholds and equipment by joint ventures			(3	)		(8	)
Net cash used in investing activities			(1,122	)		(1,066	)
Financing activities:
Proceeds from long-term borrowings			—			11,250
Payments on long-term borrowings			(150	)		(894	)
Payments of debt issuance costs			—			(329	)
Payments on joint venture borrowings			(566	)		(544	)
Payments on capital leases			(1,448	)		(131	)
Redemption of preferred stock			(2,500	)		—
Net cash (used in) provided by financing activities			(4,664	)		9,352
Effect of exchange rate on cash and cash equivalents			20			(376	)
(Decrease) increase in cash and cash equivalents			(1,422	)		5,741
Cash and cash equivalents at beginning of period			7,602			3,539
Cash and cash equivalents at end of period		$	6,180		$	9,280
Non-cash investing capital leases		$	6,290		$	—
Supplemental disclosures:
Cash paid during the period for:
	Interest	$	12,628		$	15,866
	Taxes		441			534

See Notes to Condensed Consolidated Financial Statements.

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APCOA/STANDARD PARKING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2002

(in thousands, unaudited)

1.    Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements of APCOA/Standard Parking, Inc. ("APCOA/Standard" or the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.

        In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the financial position and results of operations have been included. Operating results for the nine-month period ended September 30, 2002 are not necessarily indicative of the results that might be expected for any other interim period or the fiscal year ending December 31, 2002. The financial statements presented in this Report should be read in conjunction with the consolidated financial statements and footnotes thereto included in APCOA/Standard's 2001 Annual Report on Form 10-K filed March 29, 2002.

        Certain reclassifications have been made to the 2001 financial information to conform to the 2002 presentation.

2.    Special Charges

        Included in "Special Charges" in the accompanying condensed consolidated statements of operations are the following:

		Nine Months Ended
		September 30, 2002		September 30, 2001
		(Unaudited)
Cost associated with registration		$	676	$	—
Incremental integration costs and other			1,078		464
	Total special charges	$	1,754	$	464

        The costs associated with registration for the period ended September 30, 2002, relate to professional fees incurred to register the 14% senior subordinated second lien notes. The costs associated with incremental integration costs and other include $0.5 million for legal costs on terminated contracts, $0.3 million for costs incurred for the debt reorganization and professional fees of the parent company, $0.2 million for COBRA insurance costs of a prior subsidiary of the former parent company in accordance with ERISA requirements and $0.1 million for prior period rent and other adjustments. Special charges for the period ending September 30, 2001 relate primarily to $0.2 million in prior period retroactive insurance premium increases, $0.1 million in severance costs, and $0.2 million in prior period outside consultant costs.

3.    Exchange Offer

        On January 11, 2002, APCOA/Standard completed an unregistered exchange and recapitalization of a portion of its 9¹/4% Senior Subordinated Notes due 2008. APCOA/Standard received gross cash

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proceeds of $20.0 million and retired $91.1 million of its outstanding 9¹/4% Senior Subordinated Notes due 2008. In exchange, APCOA/Standard issued $59.3 million of 14% Senior Subordinated Second Lien Notes due 2006 and 3,500 shares of 18% Senior Convertible Redeemable Preferred Stock, with a face value of $35.0 million which is mandatorily redeemable on June 15, 2008. In conjunction with the exchange, the Company repaid $9.5 million of indebtedness under the Senior Credit Facility, paid $2.7 million in accrued interest relating to the $91.1 million of the 9¹/4% Senior Subordinated Notes due 2008 that were tendered, $9.7 million (including $1.3 million capitalized as debt issuance costs related to the amended and restated senior credit facility) in fees and expenses related to the exchange, which included a $3.0 million transaction advisory fee to AP Holdings, Inc. ("AP Holdings"), APCOA/Standard's parent company, and a repurchase of $1.5 million of redeemable preferred stock held by AP Holdings. The fees and expenses of $9.7 million related to the exchange and the amended and restated senior credit facility were provided for in the period ended December 31, 2001. The company repurchased $0.1 million of redeemable preferred stock held by AP Holdings on February 20, 2002 and $0.9 million on June 17, 2002.

        This exchange offer and recapitalization was accounted for as a "modification of terms" type of troubled debt restructuring as prescribed by FASB Statement No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings ("FAS 15"). Under FAS 15, an effective reduction in principal or accrued interest does not result in the debtor recording a gain as long as the future contractual payments (principal and interest combined) under the restructured debt are more than the carrying amount of the debt before the restructuring. In those circumstances, the carrying amount of the original debt is not adjusted and the effects of any changes are reflected in future periods as a reduction in interest expense. That is, a constant effective interest rate is applied to the carrying amount of the debt between restructuring and maturity. The effective interest rate is the discount rate that equates the present value of the future cash payments specified by the new terms with the unadjusted carrying amount of the debt.

        In addition, under FAS 15, when a debtor issues a redeemable equity interest in partial satisfaction of debt in conjunction with a modification of terms, the debtor recognizes no gain and the equity is recorded at its estimated fair value. Legal fees and other direct costs incurred by a debtor to effect a troubled debt restructuring are expensed as incurred, except for amounts incurred directly in granting an equity interest, if any.

        The accounting for this exchange under FAS 15 was as follows:

•

No gain was recognized by the Company for the excess of (a) the principal of the unregistered notes exchanged for the registered notes, over (b) the principal of the registered notes.



•

The unrecorded gain, which will remain part of the carrying value of the debt, will be amortized as a reduction to future interest expense using an effective interest rate applied to the combined balance of the unregistered and registered notes.

        On April 10, 2002, the Company filed a registration statement on Form S-4 (SEC file no. 333-86008) to offer to exchange up to $59,295,000 in aggregate principal amount of its registered 14% Senior Subordinated Notes (including unregistered notes paid as interest on unregistered notes). The registration statement, which was amended on May 24, 2002, June 17, 2002 and June 26, 2002, was declared effective by the Commission on June 28, 2002. The prospectus was supplemented on July 8, 2002 to increase the maximum amount of notes subject to the exchange to $60,298,900, thereby

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covering the notes issued as interest paid on June 15, 2002. In connection with the exchange offer, which expired on August 9, 2002, all outstanding unregistered 14% Notes were exchanged for registered 14% Notes with substantially identical terms effective August 16, 2002.

4.    Credit Facility

        The Company entered into an amended and restated credit agreement as of January 11, 2002 with the LaSalle Bank National Association ("LaSalle") and Bank One, N.A., ("Bank One") (the lenders under its prior senior credit facility) that restructured its prior $40.0 million senior credit facility into a new senior credit facility. The new facility consists of a $25.0 million revolving credit facility provided by LaSalle, which will expire on March 10, 2004, and a $15.0 million term loan held by Bank One amortizing with $5.0 million due on December 31, 2002 and the remainder due on March 10, 2004. APCOA/Standard utilizes the revolving new facility to provide readily accessible cash for working capital purposes and general corporate purposes and to provide standby letters of credit. The revolving new facility provides for cash borrowings up to the lesser of $25.0 million or 80% of its eligible accounts receivable (as defined therein) and includes a letter of credit facility with a sublimit of $8.0 million (or such greater amount as LaSalle may agree to for letters of credit). The revolving new facility bears interest based, at the Company's option, either on LIBOR plus 3.75% or the Alternate Base Rate (as defined below) plus 1.50%. The Company may elect interest periods of 1, 2, or 3 months for LIBOR-based borrowings. The Alternate Base Rate is the higher of (i) the rate publicly announced from time to time by LaSalle as its "prime rate" and (ii) the overnight federal funds rates plus 0.50%. LIBOR will at all times be determined by taking into account maximum statutory reserves required (if any). The interest rate applicable to the term loan is a fixed rate of 13.0%, of which cash interest at 9.5% will be payable monthly in arrears and 3.5% will accrue without compounding and be payable on March 10, 2004 or earlier maturity, whether pursuant to any permitted prepayment acceleration or otherwise. The new senior credit facility includes covenants that limit the Company's ability to incur additional indebtedness, issue preferred stock or pay dividends and will contain certain other restrictions on its activities. It is secured by substantially all of its existing and future domestic subsidiaries' existing and after-acquired assets (including 100% of the stock of its existing and future domestic subsidiaries and 65% of the stock of its existing and future foreign subsidiaries), by a first priority pledge of all of the common stock of the Company owned by AP Holdings and by all other existing and after-acquired property of the parent company. The senior credit facility was amended effective as of June 17, 2002 and June 30, 2002. At September 30, 2002, the Company had $4.8 million of letters of credit outstanding under the new facility and borrowings against the new facility aggregated $28.5 million.

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5.    Borrowing Arrangements

        Long-term borrowings consists of:

				Amount Outstanding
	Interest Rates(s)		Due Date	September 30, 2002		December 31, 2001
Senior Subordinated Notes	9.25	%	March 2008	$	48,877	$	140,000
Senior Subordinated Second Lien Notes	14.00	%	December 2006		61,003		—
Senior Credit Facility	Various		March 2004		28,500		28,600
Carrying value in excess of principal	Various		Various		14,948		—
Joint venture debentures	11.00-15.00	%	Various		2,866		3,432
Capital lease obligations	Various		Various		5,450		—
Other	Various		Various		2,269		3,225
					163,913		175,257
Less current portion					3,724		1,554
				$	160,189	$	173,703

6.    Subsidiary Guarantors

        Substantially all of the Company's direct or indirect wholly owned domestic subsidiaries, other than inactive subsidiaries, fully, unconditionally, jointly and severally guarantee the Company's 14% Senior Subordinated Second Lien Notes due December 15, 2006, its 9¹/4% Senior Subordinated Notes due 2008, and its senior credit facility. Financial statements of the guarantor subsidiaries are not separately presented because, in the opinion of management, such financial statements are not material to investors. The non-guarantor subsidiaries include joint ventures, wholly owned subsidiaries of the Company organized under the laws of foreign jurisdictions, inactive subsidiaries, and bankruptcy remote subsidiaries formed in connection with joint ventures, all of which are included in the consolidated

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financial statements. The following is summarized combined financial information for the Company, the guarantor subsidiaries of the Company and the non-guarantor subsidiaries of the Company:

		APCOA/Standard			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total
Balance Sheet Data:
September 30, 2002
	Cash and cash equivalents	$	3,362		$	1,494	$	1,324	$	—		$	6,180
	Notes and accounts receivable		21,235			12,503		5,506		—			39,244
	Current assets		25,435			14,039		6,908		—			46,382
	Leaseholds and equipment, net		12,715			4,773		3,547		—			21,035
	Cost in excess of net assets acquired, net		23,611			88,846		3,232		—			115,689
	Investment in subsidiaries		98,795			—		—		(98,795	)		—
	Total assets		165,747			111,034		13,950		(98,795	)		191,936
	Accounts payable		22,484			4,661		2,703		—			29,848
	Current liabilities		44,564			1,593		6,676		—			52,833
	Long-term borrowings, excluding current portion		157,198			383		2,608		—			160,189
	Senior convertible preferred stock		45,191			—		—		—			45,191
	Redeemable preferred stock		54,826			—		—		—			54,826
	Common stock subject to put/call rights		9,228			—		—		—			9,228
	Total stockholders' (deficit) equity		(154,772	)		105,812		3,752		(98,795	)		(144,003	)
	Total liabilities and stockholders' equity (deficit)		165,747			111,034		13,950		(98,795	)		191,936

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December 31, 2001
	Cash and cash equivalents	$	8,522		$	(2,009	)	$	1,089	$	—		$	7,602
	Notes and accounts receivable		30,568			5,767			3,941		—			40,276
	Current assets		40,105			3,822			5,145		—			49,072
	Leaseholds and equipment, net		10,377			5,141			3,065		—			18,583
	Cost in excess of net assets acquired, net		23,492			88,618			3,222		—			115,332
	Investment in subsidiaries		92,335			—			—		(92,335	)		—
	Total assets		170,906			101,771			11,892		(92,335	)		192,234
	Accounts payable		25,238			6,865			2,517		—			34,620
	Current liabilities		55,706			7,769			5,753		—			69,228
	Long-term borrowings, excluding current portion		171,127			—			2,576		—			173,703
	Redeemable preferred stock		61,330			—			—		—			61,330
	Common stock subject to put/call rights		8,500			—			—		—			8,500
	Total stockholders' (deficit) equity		(136,054	)		93,034			2,170		(92,335	)		(133,185	)
	Total liabilities and stockholders' equity (deficit)		170,906			101,771			11,892		(92,335	)		192,234
Income Statement Data:
Nine Months Ended September 30, 2002
	Parking Revenue	$	374,729		$	53,063		$	16,543	$	—		$	444,335
	Cost of parking services		348,386			41,537			13,844		—			403,767
	General and administrative expenses		2,495			19,851			201		—			22,547
	Special charges		1,690			—			64		—			1,754
	Depreciation and amortization		3,316			1,390			728		—			5,434
	Management fee—parent company		2,250			—			—		—			2,250
Operating income			16,592			(9,715	)		1,706		—			8,583
	Interest expense, net		11,775			(8	)		252		—			12,019
	Equity in earnings of subsidiaries		(8,945	)		—			—		8,945			—
	Net (loss) income		(3,913	)		(9,742	)		797		8,945			(3,913	)

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Nine Months Ended September 30, 2001
	Parking Revenue	$	373,157		$	64,025		$	16,595		$	—	$	453,777
	Cost of parking services		346,516			52,115			13,507			—		412,138
	General and administrative expenses											—
	Special charges		464			—			—			—		464
	Depreciation and amortization		3,785			3,731			955			—		8,471
	Operating income		19,355			(11,356	)		1,936			—		9,935
	Interest expense, net		12,871			(43	)		342			—		13,170
	Equity in earnings of subsidiaries		(10,332	)		—			—			10,332		—
	Net (loss) income		(8,521	)		(11,313	)		981			10,322		(8,521	)
Cash Flow Data:
Nine Months Ended September 30, 2002
Net cash provided by operating activities		$	603			3,503		$	238		$	—	$	4,344
Investing activities:
	Purchase of leaseholds and equipment		(1,119	)		—			(3	)		—		(1,122	)
Net cash used in investing activities			(1,119	)		—			(3	)		—		(1,122	)
	Financing activities:
Payments on long-term borrowings			(150	)		—			—			—		(150	)
Payments on joint venture borrowings			(566	)		—			—			—		(566	)
Payments on capital leases			(1,448	)		—			—			—		(1,448	)
Redemption of redeemable preferred stock			(2,500	)		—			—			—		(2,500	)
Net cash used in financing activities			(4,664	)		—			—			—		(4,664	)
Effect of exchange rate changes			20			—			—			—		20

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Nine Months Ended September 30, 2001
Net cash used in operating activities		$	(2,397	)	$	(3,205	)	$	(2,977	)	$	—	$	(2,169	)
Investing activities:
	Purchase of leaseholds and equipment		(1,012	)		(46	)		(8	)		—		(1,066	)
	Net cash used in investing activities		(1,012	)		(46	)		(8	)		—		(1,066	)
	Financing activities:
Proceeds from long-term borrowings			11,250			—			—			—		11,250
Payments on long-term borrowings			(894	)		—			—			—		(894	)
Payments of debt issuance costs			(329	)		—			—			—		(329	)
Payments on joint venture borrowings			(544	)		—			—			—		(544	)
Payments on capital leases			(131	)		—			—			—		(131	)
Net cash provided by financing activities			9,352			—			—			—		9,352
Effect of exchange rate changes			(376	)		—			—			—		(376	)

7.    Recently Issued Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.

        On January 1, 2002, the Company adopted SFAS No. 141 and 142. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and also includes guidance on the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The initial adoption of SFAS No. 141 did not affect the Company's results of operations or its financial position.

        The adoption of SFAS No. 142 eliminates the amortization of goodwill beginning January 1, 2002, and instead requires that the goodwill be tested for impairment. Transitional impairment tests of goodwill made during the nine months ended September 30, 2002 did not require adjustment to the carrying value of its goodwill. As of September 30, 2002, the Company's definite lived intangible assets of $2,958 net of accumulated amortization of $3,099, primarily consisting of non-compete agreements, continue to be amortized over their useful lives.

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        Amortization expense for intangible assets during the nine months ended September 30, 2002 was $429. Estimated amortization expense for the remainder of 2002 and the five succeeding fiscal years is as follows:

	Estimated Amortization Expense
2002 (remainder)	$	158
2003		587
2004		587
2005		570
2006		516
2007		516

        Actual results of operations for the nine months ended September 30, 2002 and the pro forma results of operations for the nine months ended September 30, 2001 had we applied the non-amortization provisions of SFAS 142 in the prior period are as follows:

	For the nine months ended September 30,
	2002			2001
	(Unaudited)
Net loss	$	(3,913	)	$	(8,521	)
Add: goodwill amortization		—			2,174
Adjusted net loss	$	(3,913	)	$	(6,347	)

        In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("Opinion 30"), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS No. 121. For example, SFAS No. 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. SFAS No. 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike SFAS No. 121, SFAS No. 144 does not provide guidance on impairment of goodwill. Rather, goodwill is evaluated for impairment under SFAS No. 142, Goodwill and Other Intangible Assets. The Company adopted SFAS No. 144 on January 1, 2002, and there was no impact to the results of operations or its financial position upon adoption.

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        During the second quarter ended June 30, 2002, the Company became subject to and adopted a new accounting standard (EITF 01-14), which requires the recognition of both revenues and expenses in equal amounts for costs directly reimbursed from its management clients. This accounting change has no impact on operating earnings or net earnings. Historically, expenses directly reimbursed under management agreements have been netted against the reimbursement received. As required by this new accounting standard, these items have been reclassified in all prior periods to conform to the new presentation. For the three month period ended September 30, 2002, the impact is an increase of $101.9 million in both revenue and expenses, as compared to $96.4 million for the three month period ended September 30, 2001. For the nine month period ended September 30, 2002, the impact is an increase of $277.4 million in both revenue and expenses, as compared to $270.8 million for the nine month period ended September 30, 2001.

        In August 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.146 (SFAS 146), "Accounting for Costs Associated with Exit or Disposal Activities". SFAS 146 nullifies the guidance of the Emerging Issues task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. SFAS 146 also establishes that fair value is the objective for the initial measurement of the liability. The provisions of SFAS 146 are required for exit or disposal activities that are initiated after December 31, 2002. At this time we do not believe the adoption of SFAS 146 will have a material impact on our financial statements.

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

        APCOA/Standard Parking, Inc. ("APCOA/Standard" or the "Company") operates in a single reportable segment, operating parking facilities under two types of arrangements: management contracts and leases. Under a management contract, APCOA/Standard typically receives a base monthly fee for managing the property and may also receive a small incentive bonus based on the achievement of facility revenues above a base amount among other factors. In some instances, APCOA/Standard also receives certain fees for ancillary services. Under lease arrangements, APCOA/Standard generally pays to the property owner either a fixed annual rental, a percentage of gross customer collections or a combination thereof. APCOA/Standard collects all revenues under lease arrangements and is responsible for most operating expenses, but it is typically not responsible for major maintenance or capital expenditures. As of September 30, 2002, APCOA/Standard operated approximately 84% of its 1,907 parking facilities under management contracts and approximately 16% under leases.

        Parking services revenue—lease contracts.    Parking services revenue related to lease contracts consists of all revenues received at a leased facility, including development fees, gains on sales of contracts and payments for exercising termination rights.

        Parking services revenue—management contracts.    Management contract revenue consists of management fees, including both fixed and revenue-based fees, and fees related to ancillary services such as accounting, equipment leasing, payments received for exercising termination rights, consulting, insurance and other value-added services provided with respect to managed locations. Management

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contract revenue excludes gross customer collections at such locations. Management contracts generally provide APCOA/Standard a management fee regardless of the operating performance of the underlying facility.

        Reimbursement of management contract expenses.    Reimbursement of management contract expenses consists of the direct reimbursement from the property owner for operating expenses incurred under a management contract.

        Cost of parking services—lease contracts.    The cost of parking services under a lease arrangement consists of contractual rental fees paid to the facility owner and all operating expenses incurred in connection with operating the leased facility. Contractual fees paid to the facility owner are based on either a fixed contractual amount or a percentage of gross revenue, or a combination thereof. Generally, under a lease arrangement, APCOA/Standard is not responsible for major capital expenditures or property taxes.

        Cost of parking services—management contracts.    The cost of parking services under a management contract is generally passed through to the facility owner. As a result, these costs are included in reimbursed management contract expense. Several APCOA/Standard contracts, which are referred to as reverse management contracts, however, require APCOA/Standard to pay for certain costs that are offset by larger management fees.

        Reimbursed management contract expense.    Reimbursed management contract expense consists of the costs incurred on behalf of the property owner for operating expenses that are directly reimbursed under a management contract.

        General and administrative expenses.    General and administrative expenses include salaries, wages, travel and office-related expenses for the headquarters, field offices and supervisory employees.

Critical Accounting Policies and Estimates

        Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Accounting estimates are an integral part of the preparation of the financial statements and the financial reporting process and are based upon current judgments. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 reported period. Certain accounting estimates are particularly sensitive because of their complexity and the possibility that future events affecting them may differ materially from the Company's current judgments and estimates.

        This listing of critical accounting policies is not intended to be a comprehensive list of all of the Company's accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management's judgment regarding accounting policy. The Company believes that of its significant accounting policies, as discussed in Note A of the consolidated financial statements included

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in the Company's annual report on Form 10-K for the year ended December 31, 2001, the following may involve a higher degree of judgment and complexity:

Long-Lived Assets—The Company accounts for impairment of long-lived assets, which includes goodwill, in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

        When indicators of impairment are present, the Company periodically reviews the carrying value of long-lived assets, including goodwill, contract and lease rights, and non-compete agreements, to determine if the net book values of such assets continue to be recoverable over the remainder of the original estimated useful life. In performing this review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventful disposition. If the sum of the expected net future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the estimated diminution of value. If the assets involved are to be held and used in the operations of the Company, consideration is also given to actions or remediation the Company might take in order to achieve the original estimates of cash flows.

Leaseholds and Equipment—Leaseholds, equipment and leasehold improvements are stated at cost. Leaseholds (cost of parking contracts) are amortized on a straight-line basis over the average contract life of 10 years. Equipment is depreciated on the straight-line basis over the estimated useful lives of approximately 5 years on average. Leasehold improvements are amortized on the straight-line basis over the terms of the respective leases or the service lives of the improvements, whichever is shorter (average of approximately 7 years). If the renewal rate of contracts is less than initially estimated, accelerated amortization or impairment may be necessary.

Summary of Operating Facilities

        The following table reflects the Company's facilities at the end of the periods indicated:

		September 30, 2002	December 31, 2001	September 30, 2001
Managed facilities		1,595	1,612	1,594
Leased facilities		312	328	341
	Total facilities	1,907	1,940	1,935

        The Company's strategy is to add locations in core cities where a concentration of locations improves customer service levels and operating margins.

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Results of Operations

        In analyzing the gross margins of APCOA/Standard, it should be noted that the cost of parking services for parking facilities under management contracts incurred in connection with the provision of management services is generally paid by its clients. Several management contracts, however, which are referred to as reverse management contracts, require the Company to pay for certain costs that are offset by larger management fees. Margins for lease contracts vary significantly not only due to operating performance, but also variability in parking rates in different cities and varying space utilization by parking facility type and location.

        The attacks that occurred on September 11, 2001 ("September 11^th") had an immediate effect on the Company's business at all of the airport locations and, to a lesser extent, at isolated urban facilities near governmental institutions. Although business at airports had been declining before the September 11^th attacks, an immediate significant decrease in airport revenues occurred following those events, compared to the same period of 2000. Parking revenue at airports we operated in September 2002 increased 35.6% compared to September 2001 and decreased 3.7% compared to September 2000. While we believe that existing regulations may be relaxed in the future, there remain in place several stringent security measures that prohibit parking within a certain distance of the terminal, which continues to impact utilization of parking spaces. The airport parking transportation market represented approximately 21% of the Company's 2001 annual gross profit.

        The following should be read in conjunction with the condensed consolidated financial statements.

Three Months ended September 30, 2002 Compared to Three Months ended September 30, 2001

        Parking services revenue—lease contracts.    Lease contract revenue decreased $1.0 million, or 2.6%, to $36.5 million in the third quarter of 2002, compared to $37.5 million in the third quarter of 2001. This decrease resulted from the net reduction of 16 leases through contract expirations and the downturn in general economic conditions.

        Parking services revenue—management contracts.    Management contract revenue decreased $2.8 million, or 13.4%, to $18.5 million in the third quarter of 2002, compared to $21.3 million in the third quarter of 2001. This decrease resulted from the net reduction of 17 management contracts and the negative economic impact on our reverse management contracts, which was partially offset by the positive impact of the conversion to a capital lease program for our vehicles.

        Reimbursement of management contract expenses.    Reimbursement of management contract expenses increased $5.5 million to $101.9 million for the third quarter of 2002, compared to $96.4 million for the third quarter of 2001. The increase resulted from additional reimbursements for costs incurred on the behalf of owners.

        Cost of parking services—lease contracts.    Cost of parking services for lease contracts decreased $0.1 million, or 0.2%, to $33.7 million for the third quarter of 2002, compared to $33.8 million in the third quarter of 2001. This decrease resulted primarily from the net reduction of 16 leases through terminations and contract expirations. Gross margin for lease contracts decreased to 7.5% for the third quarter of 2002 compared to 9.7% for the third quarter of 2001. This decrease in gross margin resulted from the negative economic impact on operating expenses and revenues, which was partially offset by the positive impact of the conversion to a capital lease program for our vehicles.

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        Cost of parking services—management contracts.    Cost of parking services for management contracts decreased $4.9 million, or 41.1%, to $6.9 million for the third quarter of 2002, compared to $11.8 million in the third quarter of 2001. This decrease resulted primarily from the net reduction of 17 management contracts. Gross margin for management contracts improved to 62.4% in the third quarter of 2002 compared to 44.7% for the third quarter of 2001. Most management contracts have no cost of parking services related to them, as all costs are reimbursable to the Company. However, several contracts, which are referred to as reverse management contracts, require the Company to pay for certain costs that are offset by larger management fees. The increase in gross margin percent for management contracts was related to the reduction in costs of operations, conversion to a capital lease program for our vehicles and the termination of several unprofitable contracts.

        Reimbursed management contract expense.    Reimbursed management contract expense increased $5.5 million to $101.9 million for the third quarter of 2002, compared to $96.4 million for the third quarter of 2001. The increase resulted from additional costs incurred on the behalf of owners.

        General and administrative expenses.    General and administrative expenses increased $1.2 million, or 19.5%, to $7.4 million for the third quarter of 2002, as compared to $6.2 million for the third quarter of 2001. This increase resulted from a favorable year to date accrual adjustment in 2001 for approximately $0.8 million that did not occur in 2002.

        Special charges.    The Company recorded $0.3 million of special charges in the third quarter of 2002, as compared to $0.5 million in the third quarter of 2001. The 2002 special charges relate primarily to legal costs incurred for the registration of the 14% senior subordinated second lien notes and costs related to terminated contracts.

        Management fee—parent company.    The Company recorded $0.8 million of management fee expense in the third quarter of 2002, to our parent company, AP Holdings, pursuant to the Company's management agreement with AP Holdings. The actual payment of the management fee may be limited by the terms and conditions as set forth in the senior credit facility. There was no management fee in the third quarter of 2001.

Nine Months ended September 30, 2002 Compared to Nine Months ended September 30, 2001

        Parking services revenue—lease contracts.    Lease contract revenue decreased $12.4 million, or 10.2%, to $108.2 million in the first nine months of 2002, compared to $120.6 million in the first nine months of 2001. This decrease resulted from the net reduction of 29 leases through contract expirations and the downturn in general economic conditions.

        Parking services revenue—management contracts.    Management contract revenue decreased $3.7 million, or 6.0%, to $58.7 million in the first nine months of 2002, compared to $62.5 million in the first nine months of 2001. This decrease resulted from the net addition of 1 management contract through internal growth and the positive impact of the conversion to a capital lease program for our vehicles, which was more than offset by the negative economic impact on our reverse management contracts.

        Reimbursement of management contract expenses.    Reimbursement of management contract expenses increased $6.6 million to $277.4 million for the first nine months of 2002, compared to

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$270.8 million for the first nine months of 2001. The increase resulted from additional reimbursements for costs incurred on the behalf of owners.

        Cost of parking services—lease contracts.    Cost of parking services for lease contracts decreased $10.6 million, or 9.7%, to $98.2 million for the first nine months of 2002, compared to $108.8 million in the first nine months of 2001. This decrease resulted primarily from the net reduction of 29 leases through terminations and contract expirations. Gross margin for lease contracts decreased to 9.2% for the first nine months of 2002 compared to 9.8% for the first nine months of 2001. This decrease in gross margin resulted from the negative economic impact on operating expenses and revenues, which was partially offset by the positive impact of the conversion to a capital lease program for our vehicles.

        Cost of parking services—management contracts.    Cost of parking services for management contracts decreased $4.4 million, or 13.7%, to $28.2 million for the first nine months of 2002, compared to $32.6 million in the first nine months of 2001. This decrease resulted primarily from the reduction of several unprofitable contracts and an improvement in the cost of providing management services offset by the net addition of 1 management contract. Gross margin for management contracts improved to 52.1% in the first nine months of 2002 compared to 47.8% for the first nine months of 2001. Most management contracts have no cost of parking services related to them, as all costs are reimbursable to the Company. However, several contracts, which are referred to as reverse management contracts, require the Company to pay for certain costs that are offset by larger management fees. The increase in gross margin percent for management contracts was related to the reduction in costs of operations, conversion to a capital lease program for our vehicles and the termination of several unprofitable contracts.

        Reimbursed management contract expense.    Reimbursed management contract expense increased $6.6 million to $277.4 million for the first nine months of 2002, compared to $270.8 million for the first nine months of 2001. The increase resulted from additional costs incurred on the behalf of owners.

        General and administrative expenses.    General and administrative expenses decreased $0.2 million, or 1.0%, to $22.6 million for the first nine months of 2002, as compared to $22.8 million for the first nine months of 2001. This decrease resulted from cost savings, staff reductions and operating efficiencies.

        Special charges.    The Company recorded $1.8 million of special charges in the first nine months of 2002, as compared to $.5 million in the first nine months of 2001. The 2002 special charges relate primarily to legal costs incurred for the registration of the 14% senior subordinated second lien notes, costs related to terminated contracts, costs related to the parent company debt reorganization, insurance costs in accordance with ERISA requirements, prior years rent adjustments and other items. (See Note 2 of Item 1).

        Management fee—parent company.    The Company recorded $2.3 million of management fee in the first nine months of 2002 to our parent company, AP Holdings, pursuant to the Company's management agreement with AP Holdings. The actual payment of the management fee may be limited by the terms and conditions as set forth in the senior credit facility. There was no management fee in the first nine months of 2001.

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Liquidity and Capital Resources

        On January 11, 2002, the Company completed a restructuring of its publicly issued debt. The Company exchanged $91.1 million of its outstanding 9¹/4% notes due 2008 for $59.3 million of the Company's newly issued 14% senior subordinated second lien notes due 2006 and shares of the Company's newly issued Series D preferred stock. As part of these transactions, the Company also received $20.0 million in cash. The cash was used to repay borrowings under the Company's old credit facility, repurchase shares of existing redeemable Series C preferred stock owned by our parent company and pay expenses incurred in connection with the restructuring transactions (including approximately $3.0 million to our parent company as a transaction advisory fee).

        The Company entered into an amended and restated credit agreement as of January 11, 2002 with the LaSalle Bank National Association ("LaSalle") and Bank One, N.A., ("Bank One") (the lenders under its prior senior credit facility) that restructured its prior $40.0 million senior credit facility into a new senior credit facility. The new facility consists of a $25.0 million revolving credit facility provided by LaSalle, which will expire on March 1, 2004 and a $15.0 million term loan held by Bank One amortizing with $5.0 million due on December 31, 2002 and the remainder due on March 10, 2004. APCOA/Standard utilizes the revolving new facility to provide readily accessible cash for working capital purposes and general corporate purposes and to provide standby letters of credit. The revolving new facility provides for cash borrowings up to the lesser of $25.0 million or 80% of its eligible accounts receivable (as defined therein) and includes a letter of credit facility with a sublimit of $8.0 million (or such greater amount as LaSalle may agree to for letters of credit). The revolving new facility bears interest based, at the Company's option, either on LIBOR plus 3.75% or the Alternate Base Rate (as defined below) plus 1.50%. The Company may elect interest periods of 1, 2, or 3 months for LIBOR-based borrowings. The Alternate Base Rate is the higher of (i) the rate publicly announced from time to time by LaSalle as its "prime rate" and (ii) the overnight federal funds rates plus 0.50%. LIBOR will at all times be determined by taking into account maximum statutory reserves required (if any). The interest rate applicable to the term loan is a fixed rate of 13.0%, of which cash interest at 9.5% will be payable monthly in arrears and 3.5% will accrue without compounding and be payable on March 10, 2004 or earlier maturity, whether pursuant to any permitted prepayment acceleration or otherwise. The new senior credit facility includes covenants that limit the Company's ability to incur additional indebtedness, issue preferred stock or pay dividends and will contain certain other restrictions on its activities. It is secured by substantially all of its existing and future domestic subsidiaries' existing and after-acquired assets (including 100% of the stock of our existing and future domestic subsidiaries and 65% of the stock of its existing and future foreign subsidiaries), by a first priority pledge of all of the common stock of the Company owned by AP Holdings and by all other existing and after-acquired property of the parent company. The senior credit facility was amended effective as of June 17, 2002 and June 30, 2002. At September 30, 2002, the Company had $4.8 million of letters of credit outstanding under the new facility and borrowings against the new facility aggregated $28.5 million.

        As a result of day-to-day activity at the parking locations, APCOA/Standard collects significant amounts of cash. Lease contract revenue is generally deposited into local APCOA/Standard bank accounts, with a portion remitted to the clients in the form of rental payments according to the terms of the leases. Under management contracts, some clients require APCOA/Standard to deposit the daily receipts into a local APCOA/Standard bank account, with the cash in excess of the Company's operating expenses and management fees remitted to the client at negotiated intervals. Other clients require the Company to deposit the daily receipts into client accounts and the clients then reimburse the Company for operating expenses and pay the Company's management fee subsequent to month-end. Some clients require a segregated account for the receipts and disbursements of locations.

        Gross daily collections are collected by APCOA/Standard and deposited into banks in one of three methods, which impact the Company's investment in working capital: (i) locations with revenues

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deposited into APCOA/Standard's bank accounts reduce the Company's investment in working capital, (ii) locations that have segregated accounts generally require no investment in working capital and (iii) accounts where the revenues are deposited into the clients' accounts increase the Company's investment in working capital. The Company's average investment in working capital depends on its contract mix. For example, an increase in contracts that required all cash deposited in the Company's bank accounts reduces its investment in working capital and improves its liquidity. During the period of January 1, 2002 to September 30, 2002, there was no material decrease in these types of contracts.

        APCOA/Standard's liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments such as the Company's scheduled interest payments. Additionally, the Company's ability to utilize cash deposited into APCOA/Standard local accounts is dependent upon the availability and movement of that cash into the Company's corporate account. For all these reasons, the Company from time to time carries significant cash balances, while at the same time utilizing the senior credit facility.

        The Company is required under certain contracts to provide performance bonds. These bonds are renewed on an annual basis. The market for performance bonds has been severely impacted by the events of September 11^th and general economic conditions. Consequently, the market has contracted, resulting in an industry-wide requirement to provide additional collateral to the surety providers. As of September 30, 2002, the Company provided $4.8 million in letters of credit to collateralize its current performance bond program. The Company expects that it will have to provide additional collateral as the current bonds reach their respective expiration dates. While the Company expects that it should be able to provide sufficient collateral, given the market conditions, there can be no assurance that the Company will be able to do so.

        The ability of the Company to generate cash from operations is partially dependent upon cash collected and generated from airport parking facilities. As a result of reduced air traffic and the impact of restrictions on the use of parking facilities within 300 feet of airport terminals and also reduced traffic at hotel and retail facilities, the Company may continue to experience a reduction in its revenue and cash flow from these operations.

        There can be no assurance that the Company's cash flow from operations, combined with additional borrowings under the senior credit facility and any future credit facility, will be available in an amount sufficient to enable the Company to repay its indebtedness, including the 9¹/4% notes or the 14% notes, or to fund our other liquidity needs or planned capital expenditures. The Company has significant indebtedness. At September 30, 2002, the Company had indebtedness under the 9¹/4% notes, the 14% notes, the senior credit facility, joint venture debentures, capital lease obligations, and other asset financing totaling approximately $149.0 million, including the Company's borrowings against its senior credit facility that aggregated $28.5 million. The Company may need to refinance all or a portion of its indebtedness, including the senior credit facility, on or before their respective maturities. There can be no assurance that the Company will be able to refinance any of its indebtedness, including the senior credit facility, on commercially reasonable terms or at all.

        The Company has minimum rental commitments of $28.0 for fiscal 2002. The leased properties generate sufficient cash flow to meet the base rent payment. In April 2002, the Company entered into a $5.5 million capital lease arrangement for its leased vehicle program. The lease commitment for fiscal 2002 is approximately $2.3 million.

        The Company had cash and cash equivalents of $6.2 million at September 30, 2002, compared to $7.6 million at December 31, 2001.

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Nine Months ended September 30, 2002 Compared to Nine Months ended September 30, 2001

        Net cash provided by operating activities totaled $4.3 million in the first nine months of 2002 compared to net cash used in operating activities of $2.2 million in the first nine months of 2001. Cash provided during 2002 included a $1.0 million decrease in accounts receivable and a $4.2 million increase in insurance and other accruals and $20.0 million from the exchange (see note 3 of Item 1), which were offset by the payment of $9.0 million in fees and expenses related to the exchange (that had been provided at December 31, 2001), $9.4 million in interest payments on the senior subordinated notes and the senior subordinated second lien notes and a decrease in accounts payable of $4.8 million. Net cash used in the first nine months of 2001 included a $1.5 million decrease in accounts payable and a $4.3 million decrease in other liabilities due primarily to the $13.0 million interest payment on the senior subordinated notes. This was partially offset by a $8.7 million increase in deferred compensation, insurance and other accruals and a $1.2 million decrease in accounts receivable.

        Cash used in investing activities totaled $1.1 million for each of the first nine months of 2002 and 2001. Cash used in investing for the first nine months of 2002 and the first nine months of 2001 resulted from capital purchases to secure and/or extend leased facilities and investments in management information system enhancements.

        Cash used in financing activities totaled $4.7 million in the first nine months of 2002 compared to cash provided by financing activities of $9.4 million for the first nine months of 2001. The 2002 first nine months activity included $0.1 million in payments on the senior credit facility, $2.5 million in redemption of redeemable preferred stock (see note 3 of Item 1), $1.4 million in payments of capital lease obligations and repayments on joint venture and other borrowings of $0.7 million. Cash provided by financing activities for the first nine months of 2001 included $11.3 million in borrowings from the senior credit facility, offset by repayments on long-term and joint venture borrowings of $1.6 million, as well as payments of debt issuance costs of $0.3 million.

Special Cautionary Notice Regarding Forward-Looking Statements

        In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in this Quarterly Report generally. You should carefully review the risks described in this Quarterly Report as well as the risks described in other documents filed by the Company and from time to time with the Securities and Exchange Commission. In addition, when used in this Quarterly Report, the words "anticipates," "plans," "believes," "estimates," and "expects" and similar expressions are generally intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by the Company or these forward-looking statements. The Company undertakes no obligation to revise these forward-looking statements to reflect any future events or circumstances.

Cautionary Statements

        The Company continues to be subject to certain factors that could cause the Company's results to differ materially from expected and historical results (see the "Risk Factors" set forth in the Company's Registration Statement on Form S-4 (No. 333-86008) filed on April 10, 2002 (the "Registration Statement"), and the Company's 2001 Form 10-K filed on March 29, 2002.

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Additional Funds Would Need To Be Reserved For Future Insurance Losses If Loss Experience Were To Be Worse Than Is Expected.

        The Company provides liability and worker's compensation insurance coverage consistent with its obligations to its clients under its various management contracts. The Company is obligated to reimburse its insurance carrier for each loss incurred in the current calendar year up to the amount of a deductible specified in our insurance policies. The Company's financial statements reflect the Company's funding of all such reimbursement obligations based upon guidance and evaluation the Company has received from third party insurance professionals. There can be no assurance, however, that the ultimate amount of such reimbursement obligations will not exceed the amount presently funded, in which case the Company would need to set aside additional funds to reserve for any such excess.

Our performance bond surety program will likely require additional collateral to issue new performance bonds in support of our contracts.

        Under substantially all of our contracts with municipalities and government entities and airports, we are required to provide a performance bond to support our obligations under the contract. Due to our financial condition and the financial state of the surety bond industry during 2001 and 2002, the sureties of our performance bond program required us to collateralize a greater percentage of their performance bonds with letters of credit. As a result, our working capital needs increased and our available liquidity decreased since any letters of credit used by us to collateralize surety bonds reduces the availability of funds under our senior credit facility and limits funds available for debt service, working capital and capital expenditure requirements. If we are unable to provide sufficient collateral in the future, our sureties may not issue performance bonds to support our obligations under certain contracts. As of September 30, 2002, we had approximately $4.8 million of letters of credit outstanding as collateral with respect to our sureties' issuance of performance bonds.

        As is customary in the industry, a surety provider can refuse to provide us with new surety bonds. If any existing or future surety provider refuses to provide us with surety bonds, there can be no assurance that we would be able to find alternate providers on acceptable terms, or at all. Our inability to provide surety bonds would prevent us from obtaining new business from those entities requiring performance bonds and from renewing contracts with those entities which require performance bonds. Our inability to provide surety bonds could also result in the loss of existing contracts. Failure to find a provider of surety bonds, and the resulting inability to bid for new or renew existing contracts, could have a material adverse effect on our business and financial condition.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

        The Company's primary market risk exposure consists of risk related to changes in interest rates. Historically, the Company has not used derivative financial instruments for speculative or trading purposes.

        The Company entered into a $25.0 million revolving variable rate senior credit facility in January 2002 (see note 4 of Item 1). Interest expense on such borrowing is sensitive to changes in the market rate of interest. If the Company were to borrow the entire $25.0 million available under the facility, a 1% increase in the average market rate would result in an increase in the Company's annual interest expense of $0.3 million.

        This amount is determined by considering the impact of the hypothetical interest rates on the Company's borrowing cost, but does not consider the effects of the reduced level of overall economic

24

activity that could exist in such an environment. Due to the uncertainty of the specific changes and their possible effects, the foregoing sensitivity analysis assumes no changes in the Company's financial structure.

Foreign Currency Risk

        The Company's exposure to foreign exchange risk is minimal. All foreign investments are denominated in U.S. dollars, with the exception of Canada. The Company has approximately CAN$1.7 million of cash and no Canadian dollar denominated debt instruments at September 30, 2002. The Company does not hold any hedging instruments related to foreign currency transactions. The Company monitors foreign currency positions and may enter into certain hedging instruments in the future should it determine that exposure to foreign exchange risk has increased.

Item 4.    Controls and Procedures

        Within the 90 days prior to the date of this Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer, Chief Financial Officer Financial Officer and Principal Accounting Officer, concluded that our disclosure controls and procedures were effective. There have been no significant changes in our internal controls or other factors that could significantly affect internal controls subsequent to September 30, 2002.

25

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

        The Company is subject to various claims and legal proceedings which consist principally of lease and contract disputes and includes litigation with The County of Wayne relating to the management of parking facilities at the Detroit Metropolitan Airport. These claims and legal proceedings are considered routine, and incidental to the Company's business, and in the opinion of management, the ultimate liability with respect to these proceedings and claims will not materially affect the financial position, operations, or liquidity of the Company.

        On October 25, 2002, the Company filed an Application for Temporary Injunction and verified Complaint in the Superior Court for the Judicial District of Hartford in Hartford Connecticut against James F. Byrnes, Jr., acting Commissioner of Transportation for the State of Connecticut and First Union National Bank, in their capacity as trustee for the bondholders. The action seeks judicial interpretation of the contractual obligations of the Company in the operations of the parking facilities at the Bradley International Airport in Windsor Locks Connecticut pursuant to the 25-year lease between the Company and the State. See Company Form 10-K for fiscal year ended December 31, 2001, Item 7, Business Risks, for description of the Company's contractual relationship with the State of Connecticut. The Company has specifically requested the court for a judgment and permanent injunction prohibiting the State from attempting to recover the costs associated with anti-terrorism parking measures at the airport, diverting a capitalized interest account to pay for airport improvements and diverting airport parking receipts to pay for capital improvements and surface parking and garage security costs. There was an informal hearing before the judge on November 12, 2002. The matter was continued by the judge tentatively to November 26, 2002. As of September 30, 2002, the Company recorded a receivable for this contract in the amount of $4.0 million, which includes deficiency payments of $0.4 million and the Company made an additional $0.5 million payment in October 2002.

Item 6.    Exhibits and Reports on Form 8-K

(a)    Exhibits

Exhibit Number	Description
4.1	Supplemental Indenture governing the Company's 9-1/4% Senior Subordinated Notes due 2008, dated as of July 1, 2002, by and among the Company, the Subsidiary Guarantors and Wilmington Trust Company.
4.2	Supplemental Indenture governing the Company's 14% Senior Subordinated Second Lien Notes due 2006, dated as of July 1, 2002, by and among the Company, the Subsidiary Guarantors and Wilmington Trust Company.

(b)

Reports on Form 8-K

        During third-quarter 2002, the Company filed the following current reports on Form 8-K:

Date of Report	Description
July 8, 2002	Information regarding the reincorporation in Delaware of three operating subsidiaries and the consolidation of an additional ten operating subsidiaries.
August 14, 2002	Statements under oath of principal executive officer and principal financial officer regarding facts and circumstances relating to Exchange Act Filings.

26

SIGNATURES

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

	APCOA/Standard Parking, Inc.
Dated: November 14, 2002	By:	/s/  DANIEL R. MEYER Daniel R. Meyer Senior Vice President, Corporate Controller/ Assistant Treasurer (Principal Accounting Officer)
	By:	/s/  G. MARC BAUMANN G. Marc Baumann Executive Vice President, Chief Financial Officer/ Treasurer (Principal Financial Officer)

27

CERTIFICATIONS

I, James A. Wilhelm, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of APCOA/Standard Parking, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	November 14, 2002	By:	/s/  JAMES A. WILHELM
			James A. Wilhelm, Chief Executive Officer and President

28

CERTIFICATIONS

I, G. Marc Baumann, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of APCOA/Standard Parking, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	November 14, 2002	By:	/s/  G. MARC BAUMANN
			G. Marc Baumann, Executive Vice President, Chief Financial Officer and Treasurer

29

CERTIFICATIONS

I, Daniel Meyer, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of APCOA/Standard Parking, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	November 14, 2002	By:	/s/  DANIEL R. MEYER
			Daniel Meyer, Senior Vice President, Corporate Controller, Assistant Treasurer

30

INDEX TO EXHIBITS

Exhibit Number	Description
4.1	Supplemental Indenture governing the Company's 9-1/4% Senior Subordinated Notes due 2008, dated as of July 1, 2002, by and among the Company, the Subsidiary Guarantors and Wilmington Trust Company.
4.2	Supplemental Indenture governing the Company's 14% Senior Subordinated Second Lien Notes due 2006, dated as of July 1, 2002, by and among the Company, the Subsidiary Guarantors and Wilmington Trust Company.

31

QuickLinks

APCOA/STANDARD PARKING, INC. FORM 10-Q INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

APCOA/STANDARD PARKING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except for share data)
APCOA/STANDARD PARKING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ( in thousands, unaudited )
APCOA/STANDARD PARKING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( in thousands, unaudited )
APCOA/STANDARD PARKING, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2002 ( in thousands, unaudited )

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
CERTIFICATIONS
INDEX TO EXHIBITS

EX-4.1

                                                                   EXHIBIT 4.1

                             SUPPLEMENTAL INDENTURE

     SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated to be
effective as of July 1, 2002, among Standard Parking Corporation IL ("SPC-IL"),
a Delaware corporation, Tower Parking, Inc. ("TOWER"), a Delaware corporation,
Virginia Parking Service, Inc. ("VPS"), a Delaware corporation, APCOA/Standard
Parking, Inc. (the "COMPANY") a Delaware corporation, and State Street Bank and
Trust Company, as trustee under the indenture referred to below (the "TRUSTEE").

                                   WITNESSETH

     WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of March 30, 1998, as amended,
providing for the issuance of an aggregate principal amount of $140,000,000 of
9 1/4% Senior Subordinated Notes due 2008 (the "9-1/4% NOTES");

     WHEREAS, Standard Parking Corporation, an Illinois corporation and
guarantor under the Indenture, has been reincorporated (by merger into SPC-IL)
in Delaware, and the following additional entities, also guarantors under the
Indenture, have been merged into SPC-IL, all effective June 30, 2002: A-1 Auto
Park, Inc.; APCOA Capital Corporation; Century Parking, Inc.; Events Parking
Co., Inc.; Executive Parking Industries, L.L.C.; Metropolitan Parking System,
Inc.; S&S Parking, Inc.; Sentinel Parking Co. of Ohio, Inc.; Sentry Parking
Corporation; and Standard Parking Corporation IL, an Illinois corporation;

     WHEREAS, Tower Parking, Inc., an Ohio corporation and guarantor under the
Indenture, has been reincorporated (by merger into Tower) in Delaware, effective
June 30, 2002;

     WHEREAS, Virginia Parking Service, Inc., a Virginia corporation and
guarantor under the Indenture, has been reincorporated (by merger into VPS) in
Delaware, effective June 30, 2002;

     WHEREAS, Section 11.5 of the Indenture provides that under certain
circumstances the Company may cause, and Section 11.3 of the Indenture provides
that under certain circumstances the Company must cause, certain of its
subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the 9-1/4% Notes pursuant to a New Note Guarantee on
the terms and conditions set forth therein; and

     WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.



     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, each of
SPC-IL, Tower and VPS (the "NEW SUBSIDIARIES") and the Trustee mutually covenant
and agree for the equal and ratable benefit of the Holders of the 9-1/4% Notes
as follows:

1.   CAPITALIZED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.

2.   AGREEMENT TO NOTE GUARANTEE. Each of the New Subsidiaries hereby agrees,
jointly and severally with all other Subsidiary Guarantors, to guarantee the
Company's Obligations under the 9-1/4% Notes and the Indenture on the terms and
subject to the conditions set forth in Article 11 of the Indenture and to be
bound by all other applicable provisions of the Indenture.

3.   NO RECOURSE AGAINST OTHERS. No past, present or future director, officer,
employee, incorporator, shareholder or agent of any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the 9-1/4% Notes, any New Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a 9-1/4% Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the 9-1/4% Notes.

4.   NEW YORK LAW TO GOVERN. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture.

5.   COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

6.   EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.

7.   THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or for or in respect of the correctness of the recitals of fact contained
herein, all of which recitals are made solely by the New Subsidiaries.

                            [SIGNATURE PAGES FOLLOW]

                                        2


     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated as of July 1, 2002


                                          APCOA/STANDARD PARKING, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                               Title:
                                                     ---------------------------


                                          STANDARD PARKING CORPORATION IL


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          TOWER PARKING, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          VIRGINIA PARKING SERVICE, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          STATE STREET BANK AND TRUST COMPANY,
                                          AS TRUSTEE


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------

                                        3


                                                 Title:
                                                       -------------------------

                                        4

EX-4.2

                                                                  EXIHIBIT 4.2

                             SUPPLEMENTAL INDENTURE

     SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated to be
effective as of July 1, 2002, among Standard Parking Corporation IL ("SPC-IL"),
a Delaware corporation, Tower Parking, Inc. ("TOWER"), a Delaware corporation,
Virginia Parking Service, Inc. ("VPS"), a Delaware corporation, APCOA/Standard
Parking, Inc. (the "COMPANY") a Delaware corporation, and Wilmington Trust
Company, as trustee under the indenture referred to below (the "TRUSTEE").

                                   WITNESSETH

     WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture, dated as of January 11, 2002 (the "INDENTURE"), providing for the
issuance of an aggregate principal amount of up to $100 million plus an
additional amount of PIK Notes, if any, of 14% Senior Subordinated Second Lien
Notes due 2006 (each such note a "14% NOTE" and collectively, the "14% NOTES"),
excluding PIK Notes, if any;

     WHEREAS, SPC-IL, Tower and VPS (each such entity a "NEW SUBSIDIARY" and
collectively, the "NEW SUBSIDIARIES") are newly-created wholly-owned
subsidiaries of the Company;

     WHEREAS, the Indenture provides that under certain circumstances the New
Subsidiaries shall execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the 14% Notes and the Indenture on the terms and
conditions set for the herein (the "NOTE GUARANTEE"); and

     WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiaries and the Trustee mutually covenant and agree for the equal and
ratable benefit of the holders of the 14% Notes (the "HOLDERS") as follows:

1.   CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

2.   AGREEMENT TO GUARANTEE.  Each of the New Subsidiaries hereby agrees as
follows:

          (a) Along with all Guarantors named in the Indenture, to jointly and
     severally guarantee to each Holder of a 14% Note authenticated



     and delivered by the Trustee and to the Trustee and its successors and
     assigns, the Notes or the obligations of the Company hereunder or
     thereunder, that:

               (i) the principal of, and premium and Liquidated Damages, if any,
          and interest on the 14% Notes will be promptly paid in full when due,
          whether at maturity, by acceleration, redemption or otherwise, and
          interest on the overdue principal of and interest on the 14% Notes, if
          any, if lawful, and all other obligations of the Company to the
          Holders or the Trustee under the 14% Notes or the Indenture will be
          promptly paid in full or performed, all in accordance with the terms
          hereof and thereof; and

               (ii) in case of any extension of time of payment or renewal of
          any 14% Notes or any of such other obligations, that same will be
          promptly paid in full when due or performed in accordance with the
          terms of the extension or renewal, whether at stated maturity, by
          acceleration or otherwise. Failing payment when due of any amount so
          guaranteed or any performance so guaranteed for whatever reason, the
          Guarantors shall be jointly and severally obligated to pay the same
          immediately.

          (b) The obligations hereunder shall be unconditional, irrespective of
     the validity, regularity or enforceability of the 14% Notes or the
     Indenture, the absence of any action to enforce the same, any waiver or
     consent by any Holder of the 14% Notes with respect to any provisions
     hereof or thereof, the recovery of any judgment against the Company, any
     action to enforce the same or any other circumstance which might otherwise
     constitute a legal or equitable discharge or defense of a Guarantor.

          (c) The following is hereby waived: diligence, presentment, demand of
     payment, filing of claims with a court in the event of insolvency or
     bankruptcy of the Company, any right to require a proceeding first against
     the Company, protest, notice and all demands whatsoever.

          (d) This Note Guarantee shall not be discharged except by complete
     performance of the obligations contained in the 14% Notes and the
     Indenture, and the New Subsidiary accepts all obligations of a Guarantor
     under the Indenture.

          (e) If any Holder or the Trustee is required by any court or otherwise
     to return to the Company, the Guarantors, or any custodian,

                                        2


     trustee, liquidator or other similar official acting in relation to either
     the Company or the Guarantors, any amount paid by either to the Trustee or
     such Holder, this Note Guarantee, to the extent theretofore discharged,
     shall be reinstated in full force and effect.

          (f) The New Subsidiary shall not be entitled to any right of
     subrogation in relation to the Holders in respect of any obligations
     guaranteed hereby until payment in full of all obligations guaranteed
     hereby.

          (g) As between the Guarantors, on the one hand, and the Holders and
     the Trustee, on the other hand, (x) the maturity of the obligations
     guaranteed hereby may be accelerated as provided in Article 6 of the
     Indenture for the purposes of this Note Guarantee, notwithstanding any
     stay, injunction or other prohibition preventing such acceleration in
     respect of the obligations guaranteed hereby, and (y) in the event of any
     declaration of acceleration of such obligations as provided in Article 6 of
     the Indenture, such obligations (whether or not due and payable) shall
     forthwith become due and payable by the Guarantors for the purpose of this
     Note Guarantee.

          (h) The Guarantors shall have the right to seek contribution from any
     non-paying Guarantor so long as the exercise of such right does not impair
     the rights of the Holders under the Note Guarantee.

          (i) Pursuant to Section 12.02 of the Indenture, after giving effect to
     any maximum amount and all other contingent and fixed liabilities that are
     relevant under any applicable Bankruptcy or fraudulent conveyance laws, and
     after giving effect of any collections from, rights to receive contribution
     from or payments made by or on behalf of any other Guarantor in respect of
     the obligations of such other Guarantor under Article 12 of the Indenture,
     this new Note Guarantee shall be limited to the maximum amount permissible
     such that the obligations of such Guarantor under this Note Guarantee will
     not constitute a fraudulent transfer or conveyance.

3.   EXECUTION AND DELIVERY.  Each New  Subsidiary  agrees that its Note
Guarantee shall remain in full force and effect notwithstanding any failure to
endorse on each 14% Note a notation of such Note Guarantee.

4.   GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

          (a) Each New Subsidiary may not sell or otherwise dispose of all or
     substantially all of its assets to, or consolidate with or merge with or
     into

                                        3


     (whether or not such Guarantor is the surviving Person) another Person,
     other than the Company or another Guarantor unless:

               (i) Immediately after giving effect to such transaction, no
          Default or Event of Default exists; and

               (ii) Either (A) subject to Sections 12.04 and 12.05 of the
          Indenture, the Person acquiring the property in any such sale or
          disposition or the Person formed by or surviving any such
          consolidation or merger unconditionally assumes all the obligations of
          that Guarantor, pursuant to a supplemental indenture in form and
          substance reasonably satisfactory to the Trustee, under the 14% Notes,
          the Indenture and the Note Guarantee on the terms set forth herein or
          therein; or (B) the Net Proceeds of such sale or other disposition are
          applied in accordance with the applicable provisions of the Indenture,
          including without limitation, Section 4.10 thereof.

          (b) In case of any such consolidation, merger, sale or conveyance and
     upon the assumption by the successor Person, by supplemental indenture,
     executed and delivered to the Trustee and satisfactory in form to the
     Trustee, of the Note Guarantee endorsed upon the 14% Notes and the due and
     punctual performance of all of the covenants and conditions of the
     Indenture to be performed by the Guarantor, such successor Person shall
     succeed to and be substituted for the Guarantor with the same effect as if
     it had been named herein as a Guarantor. Such successor Person thereupon
     may cause to be signed any or all of the Note Guarantees to be endorsed
     upon all of the 14% Notes issuable under the Indenture which theretofore
     shall not have been signed by the Company and delivered to the Trustee. All
     the Note Guarantees so issued shall in all respects have the same legal
     rank and benefit under the Indenture as the Note Guarantees theretofore and
     thereafter issued in accordance with the terms of the Indenture as though
     all of such Note Guarantees had been issued at the date of the execution
     hereof.

          (c) Except as set forth in Articles 4 and 5 and Section 12.05 of
     Article 12 of the Indenture, and notwithstanding clauses (a) and (b) above,
     nothing contained in the Indenture or in any of the 14% Notes shall prevent
     any consolidation or merger of a Guarantor with or into the Company or
     another Guarantor, or shall prevent any sale or conveyance of the property
     of a Guarantor as an entirety or substantially as an entirety to the
     Company or another Guarantor.

5.   RELEASES.

                                        4


          (a) In the event of any sale or other disposition of all or
     substantially all of the assets of any Guarantor, by way of merger,
     consolidation or otherwise, or a sale or other disposition of all of the
     capital stock of any Guarantor, in each case to a Person that is not
     (either before or after giving effect to such transaction) a Subsidiary of
     the Company, then such Guarantor (in the event of a sale or other
     disposition, by way of merger, consolidation or otherwise, of all of the
     capital stock of such Guarantor) or the corporation acquiring the property
     (in the event of a sale or other disposition of all or substantially all of
     the assets of such Guarantor) will be released and relieved of any
     obligations under its Note Guarantee; PROVIDED that the Net Proceeds of
     such sale or other disposition are applied in accordance with the
     applicable provisions of the Indenture, including without limitation
     Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee
     of an Officers' Certificate and an Opinion of Counsel to the effect that
     such sale or other disposition was made by the Company in accordance with
     the provisions of the Indenture, including without limitation Section 4.10
     of the Indenture, the Trustee shall execute any documents reasonably
     requested by the Company in order to evidence the release of any Guarantor
     from its obligations under its Note Guarantee.

          (b) In the event that the company designates any Restricted Subsidiary
     that is a Guarantor as an Unrestricted Subsidiary, then such Guarantor will
     be released and relieved from any obligations under its Note Guarantee;
     PROVIDED that such designation is in accordance with the applicable
     provisions of this Indenture, including without limitation Section 4.07 and
     Section 4.10 hereof. Upon delivery by the Company to the Trustee of an
     Officers' Certificate and an Opinion of Counsel to the effect that such
     designation was made by the Company in accordance with the terms of this
     Indenture, including without limitation Section 4.07 and Section 4.10
     hereof, the Trustee will execute any documents reasonably requested by the
     Company in order to evidence the release of any Guarantor from its
     obligations under its Note Guarantee.

          (c) Any Guarantor not released from its obligations under its Note
     Guarantee shall remain liable for the full amount of principal of and
     interest on the 14% Notes and for the other obligations of any Guarantor
     under the indenture as provided in Article 12 of the Indenture.

6.   NO RECOURSE AGAINST OTHERS. No past, present or future director, officer,
employee, incorporator, shareholder or agent of any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the 14% Notes, any Note Guarantees, the Indenture or
this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a 14%

                                        5


Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the 14% Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such waiver is against public policy.

7.   NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8.   COUNTERPARTS.  The  parties  may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

9.   EFFECT OF  HEADINGS.  The  Section  headings  herein  are for  convenience
only and shall not affect the construction hereof.

10.  THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or for or in respect of the correctness of the recitals of fact contained
herein, all of which recitals are made solely by the New Subsidiaries and the
Company.

                            [SIGNATURE PAGES FOLLOW]

                                        6


     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated as of July 1, 2002

                                          APCOA/STANDARD PARKING, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                               Title:
                                                     ---------------------------


                                          STANDARD PARKING CORPORATION IL


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          TOWER PARKING, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          VIRGINIA PARKING SERVICE, INC.


                                          By:
                                             -----------------------------------
                                               Name:
                                                    ----------------------------
                                                 Title:
                                                       -------------------------


                                          WILMINGTON TRUST COMPANY, AS TRUSTEE


                                          By:
                                             -------------------------
                                                 Authorized Signatory

                                        7