Hometown Auto Retailers Settles Potential Claim

    WATERTOWN, Conn.--July 3, 2001--Hometown Auto Retailers (OTC BB: HCAR) Tuesday announced that it has reached a settlement agreement with the former owner of its Toyota of Newburgh operations that eliminates Hometown's obligation to issue 1.8 million additional shares of Hometown common stock to this former owner.
    Under terms of the original "buy/sell" agreement between the two parties, Hometown was obligated to issue the 1.8 million new shares (or cash equal to the value of those shares) to the former owner of Toyota of Newburgh if Hometown's common stock had not reached a value of $10 per share by April 2001.
    Additionally, the former owner of Toyota of Newburgh had made certain assurances to Hometown regarding the value of certain assets of Toyota of Newburgh.
    Since neither condition was met by either party, both parties have agreed that

--	Hometown will issue 200,000 additional shares of Hometown common stock to the former owner of Toyota of Newburgh,
--	Hometown will pay an additional fixed purchase price of $240,000 to the former owner of Toyota of Newburgh,
--	Hometown will pay the former owner of Toyota of Newburgh an additional 20 percent of Toyota of Newburgh's pre-tax profit in excess of approximately $57,000 per month during the 21 months commencing April 2001, and
--	All additional cash payments from Hometown to the former owner of Toyota of Newburgh shall be paid in monthly installments through January 2003.

    As a result of this new settlement agreement, Hometown no longer has to issue 1.8 million new shares to the former owner of Toyota of Newburgh. The 1.8 million shares had been treated as dilutive shares in calculating Hometown's fully diluted earnings in the quarter ended March 31, 2001.
    "We are pleased to have reached this settlement," said Corey Shaker, president and chief executive officer of Hometown. "We believe that it represents a fair solution for both sides and eliminates the risk of substantial dilution to Hometown stockholders.
    "Additionally, the contingent purchase price arrangement will indirectly benefit Richard Gaillard, a former principal of the seller and now General Manager of Toyota of Newburg. It also provides strong incentives for improving performance at Toyota of Newburgh.
    "With this new incentive in place, Toyota of Newburgh is expected to contribute greater amounts to Hometown's bottom line in future periods than it has in the past, even after taking into account the new contingent payment arrangements."