Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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|_| Preliminary Proxy Statement |_| Confidential, For Use
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|_| Soliciting Material Pursuant to Rule 14a-(11(c) or Rule 14a-12

HOMETOWN AUTO RETAILERS, INC.
(Name of Registrant as Specified in Its Charter)

Name of Person(s) Filing Proxy Statement, if other than the registrant)

- --------------------------------------------------------------------------------

Payment of Filing Fee (Check the appropriate box):

|X| No Fee required

|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 011.

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|_| Check box if any part of the fee is offset as provided by Exchange Act
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HOMETOWN AUTO RETAILERS, INC.

Notice of Annual Meeting of Stockholders
To Be Held On August 27, 2002 at 10:00 A.M.

TO THE STOCKHOLDERS OF HOMETOWN AUTO RETAILERS, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hometown
Auto Retailers, Inc. ("Hometown") will be held at the Hilton of Southbury, 1284
Strongtown Road, Southbury, Connecticut 06488, on Tuesday, August 27, 2002 at
10:00 A.M., Eastern Standard Time, for the following purposes:

1. To elect eight directors for one year terms.

2. To ratify the selection of BDO Seidman, LLP as independent auditors
for the year ending December 31, 2002.

3. To consider and approve an amendment to the Hometown 1998 Stock
Option Plan increasing by 350,000 the number of shares of common
stock available for issuance thereunder.

4. To transact such other business as may properly be brought before
the meeting or any adjournment or postponements thereof.

The Board of Directors has fixed the close of business on July 11, 2002 as
the record date for the determination of the stockholders entitled to notice of
and to vote at this meeting and at any adjournment or postponements thereof.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Corey E. Shaker
Corey E. Shaker, President and
Chief Executive Officer

Dated: Watertown, Connecticut
July 11, 2002

---------------------------------------------------------------
IMPORTANT: Whether or not you expect to attend in person, please complete,
sign, date, and return the enclosed Proxy at your earliest
convenience. This will ensure the presence of a quorum at the
meeting. Promptly signing, dating, and returning the Proxy will
save Hometown the expense and extra work of additional
solicitation. An addressed envelope for which no postage is
required has been enclosed for that purpose. Sending in your
Proxy will not prevent you from voting your stock at the
meeting if you desire to do so, as your Proxy is revocable at
your option.
---------------------------------------------------------------

HOMETOWN AUTO RETAILERS, INC.

---------------------

PROXY STATEMENT

---------------------

FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 27, 2002

This Statement is furnished to the stockholders of Hometown Auto
Retailers, Inc., a Delaware corporation ("Hometown"), in connection with the
solicitation by the Board of Directors of proxies to be used at the 2001 Annual
Meeting of Stockholders of Hometown to be held at the Hilton of Southbury, 1284
Strongtown Road, Southbury, Connecticut 06488, on Tuesday, August 27, 2002 at
10:00 A.M., Eastern Standard Time, and at any adjournments thereof. The
approximate date on which this Statement and the accompanying proxy will be
mailed to stockholders is July 15, 2002.

THE VOTING AND VOTE REQUIRED

On the record date for the meeting, the close of business on July 11, 2002
(the "Record Date"), there were outstanding 3,563,605 shares of Class A common
stock, par value $.001 per share, each of which will be entitled to one vote,
and there were outstanding 3,611,500 shares of Class B common stock, par value
$.001 per share, each of which will be entitled to ten votes. Shares represented
by each properly executed, unrevoked proxy received in time for the meeting will
be voted as specified.

Directors are elected by a plurality of the votes cast at the meeting. In
the case of election of directors, shares represented by a proxy which are
marked "WITHHOLD" to vote for all eight nominees will not be counted in
determining whether a plurality vote has been received for the election of
directors. Approval of an amendment to the Hometown 1998 Stock Option Plan and
ratification of selection of auditors requires a majority of votes cast at the
meeting provided a quorum is present.

All shares represented by valid proxies will be voted in accordance with
the instructions contained therein. A proxy may be revoked by the stockholder
giving the proxy at any time before it is voted by delivering oral or written
notice to the Chief Financial Officer of Hometown at or prior to the meeting,
and a prior proxy is automatically revoked by a stockholder giving a subsequent
proxy or attending and voting at the meeting. Attendance at the meeting in and
of itself does not revoke a prior proxy.

PROPOSAL NO. 1

ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION

At this meeting eight directors are to be elected to serve for one-year
terms, each to hold office until his successor is duly elected and qualified. It
is not contemplated that any nominee will be unable to serve as a director, but
if such contingency should occur prior to the meeting, the persons named as
proxies in the enclosed proxy or their substitutes will have the right to vote
for substitute nominees. The nominees were selected by the Board of Directors of
Hometown and are all currently directors. Certain information with respect to
each nominee is stated below.

Directors Nominated for One-Year Terms:

Name Age Position with Hometown Director Since
- ---- --- ---------------------- --------------

Corey E. Shaker 45 President, Chief Executive 1997
Officer and Director

William C. Muller Jr. 50 Regional Vice President - 1997
South Division and Director

Joseph Shaker 34 Director 1997

Salvatore A. Vergopia 62 Director 1997

Edward A. Vergopia 32 Director 1997

H. Dennis Lauzon 53 Director 2002

Timothy C. Moynahan * 62 Director 2002

Steven A. Fournier * 47 Director 2002

- --------------
* Member of Audit and Compensation Committees

Corey Shaker was named President and Chief Operating Officer on February
7, 2000, and added the title of Chief Executive Officer on August 29, 2000. In
addition, he was Vice President-Connecticut Operations since October 1, 1997 and
was in charge of Hometown's Company-wide sales training efforts. Prior to that,
from 1989 he was Chief Operating Officer and General Manager of Family Ford Inc.
where he was responsible for all aspects of its operations. He is a member of
NADA Ford F01 20 group. He was awarded the Lincoln Mercury Salesperson of the
Nation award in 1980 and is a three-time winner of the Lincoln Mercury Inner
Circle award. Mr. Shaker serves on the board of directors of AdStar Inc., a
provider of classified ad placement services on the internet and other
electronic delivery channels. He is also a first cousin to Steven Shaker, the
Regional VP - North Division, and Joseph Shaker, a director of the Company. He
holds a B.S. in Business Administration from Providence College.

William C. Muller Jr. has been Regional Vice President - South Division
since March 2000. Mr. Muller has been Vice President-New Jersey Operations since
October 1, 1997. In addition, from 1980 he was the President of Muller Toyota,
Inc. and of Muller Chevrolet, Oldsmobile, Isuzu, Inc (both of which are
currently known as Muller Automotive Group, Inc. and Good Day Chevrolet,
Oldsmobile, Isuzu, Inc., respectively.) Under his management, Muller Toyota has
been: (a) a 13-time recipient of Toyota's Prestigious President's Award, given
to those dealers with superior levels of customer satisfaction who also exceed
capital standards and have high market penetration and facilities that meet or
exceed Toyota standards; (b) a 13-time recipient of Toyota Parts Excellence
Award; (c) a 9-time winner of Toyota Service Excellence Award; and (d) a 3-time
winner of Toyota's Sales Excellence Award. He holds a B.A. degree from Fairleigh
Dickinson University.

Joseph Shaker was President and Chief Operating Officer from October 1,
1997 to February 7, 2000, and was in charge of the Company's dealer acquisition
program, including the implementation of such programs as may be necessary to
assimilate new dealers into Hometown's operational model. In addition, from 1991
he was the Chief Operating Officer of Shaker's Lincoln Mercury, Shaker's Jeep
Eagle and Lincoln Mercury Autocare in Connecticut. In 1992, at the request of
Ford Motor Company, he developed the pilot free-standing neighborhood Autocare
Center which has become the model for free-standing neighborhood auto
maintenance centers established by Ford Motor with certain of its other

dealers. He also started Shaker's Lincoln Mercury limousine department in 1992
and has been responsible for its growth and implementation. He is a Member of
the Executive Committee of the NADA 20 Group. He is the brother of Steven
Shaker, the Regional VP - North Division, and a first cousin of Corey Shaker, a
director of the Company. He holds a B.S. (Management) degree from Bentley
College.

Salvatore A. Vergopia had been Chairman of the Board from October 1997 to
December 2000, and Chief Executive Officer from October 1997 to August 2000, of
Hometown. In addition, from 1992 until December, 2000, he was President and for
over 20 years prior thereto, Vice President of Westwood Lincoln Mercury Sales
Inc. He is also the father of Edward Vergopia, director. He holds a B.S. degree
from Northern Arizona University.

Edward A. Vergopia was formerly Vice President - Fleet Operations from
October 1997 to December 2000. In addition, from 1988 until December, 2000, he
was Executive Vice President of Westwood where, among other responsibilities, he
managed the Lincoln Mercury Division of Spoilers Plus (custom cars) and Westwood
Lincoln Mercury Limousine Department. During those periods, he also worked in
the Leasing, Financing and Parts and Service Departments of Westwood Lincoln
Mercury. He is also the son of Salvatore Vergopia, director. He holds a B.B.A.
from the University of Miami.

H. Dennis Lauzon has been the President and owner of Parkway Toyota since
1978. Mr. Lauzon is on the Toyota Dealers Advertising Board as well as the
Dealer Council. He is also on the board of Trustees for Hackensack University
Medical Center. Mr. Lauzon attended Fairleigh Dickinson University.

Timothy C. Moynahan has been a founding partner in the law firm Moynahan,
Minnella, Broderick and Tindall since 1974. Mr. Moynahan is a director of The
Institute of Human Virology, at the University of Maryland School of Medicine.
He is also the President of the Connecticut Chapter of the Ireland Chamber of
Commerce, a non-profit organization which promotes economic relationships
between the United States and Ireland and is Vice-President of the Paula A.
Moynahan Skin Care Company, a manufacturer of skin care products. Mr. Moynahan
holds a BS degree in History from Providence College and a JD degree from
Catholic University School of Law.

Steven A. Fournier has been the President and Chief Executive Officer of
Gar-Kenyon Technologies, LLC, a manufacturer of hydraulic aerospace components,
since December 2001. He has also been President and Chief Operating Officer of
Matthews Ventures, a diversified holding company, since 1992. Mr. Fournier
currently serves as Director, Treasurer, and member of the executive committee
of the Greater New Haven Chamber of Commerce. Mr. Fournier holds a Bachelor of
Science Degree in Accounting from Bentley College in 1975 and is a Certified
Public Accountant.

The Board Unanimously Recommends A Vote FOR The Election Of Each Of The
Nominees.

Committees of the Board of Directors

During the last fiscal year Hometown's Board of Directors held 15
meetings. Hometown's Board of Directors has established compensation and audit
committees, whose members are composed of two non-employee directors: Messrs.
Moynahan and Fournier. It is the intention of Hometown to appoint only
independent directors to the Audit and Compensation Committees.

The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of Hometown, reviews
general policy matters relating to compensation and benefits of employees of
Hometown and administers the issuance of stock options and discretionary cash
bonuses to Hometown's officers, employees, directors and consultants. The
Compensation Committee met 2 times in fiscal year 2001. The report of the
Compensation Committee appears below.

Hometown's Board of Directors has adopted a written charter for the Audit
Committee, which is attached hereto as an Appendix. The Audit Committee meets
with management and Hometown's independent public accountants to determine the
adequacy of internal controls and other financial reporting matters. The Audit
Committee met with the auditors to review the planned scope and the results of
the audit. The members of the Audit Committee consist of Messrs. Moynahan and
Fournier, both of who are independent (as defined in Rule 4200(a)(14) of the
National Association of Securities Dealers'.) The Audit Committee met 5 times in
fiscal year 2001. (See also "Audit Committee Report," below.)

All directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of all committees of the Board on
which that director served.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Leases

Hometown has leased from various affiliates the premises occupied by
certain of its dealerships. Each of the governing leases became effective as of
the closing of the initial public offering, has a term expiring in 2013, is on a
triple net basis and provides for a consumer price index ("CPI") increase to the
base rent for the five-year periods commencing January 1, 2004 and 2009.
Hometown believes that each lease was at their fair market value at inception.

Hometown leases, for an initial annual base rental of $240,000, the
premises occupied by its Lincoln Mercury dealership in Watertown, Connecticut,
and for an initial base rental of $240,000 and $72,000 respectively, the
premises occupied by the Family Ford and Shaker Jeep/Eagle dealerships in
Waterbury, Connecticut from Shaker Enterprises, a Connecticut general
partnership whose seven partners include Joseph Shaker, Corey Shaker, Steven
Shaker and Janet Shaker. Corey Shaker is President and a director and principal
stockholder of the Company. Steven Shaker is Regional Vice President-North
Division and a principal stockholder of the Company. Joseph Shaker is a director
and a principal stockholder of the Company. Janet Shaker is a principal
stockholder of the Company.

Hometown leases, for an initial annual base rental of $360,000 and
$396,000 respectively the premises occupied by its Toyota ("Toyota") dealership
in Clinton, New Jersey and its Chevrolet/Oldsmobile/Isuzu ("Chevy") dealership
in Stewartsville, New Jersey from Rellum Realty Company, a New Jersey general
partnership, one of whose two partners is William C. Muller Jr. Mr. Muller is
Regional Vice President-South Division, director and a principal stockholder of
the Company. The Toyota and Chevy leases are treated as capital leases. In
connection with the acquisition in 1999 of real estate used by Baystate Lincoln
Mercury, Hometown guaranteed the mortgage debt of Rellum Realty Company. The
1999 guaranty was given in substitution for a February 1998 guaranty of that
debt by the Muller Group, a subsidiary of the Company. As of December 31, 2001
the mortgage debt balance is $5.2 million. The Company makes annual lease
payments of $756,000 to the landlord. The annual mortgage payments made by the
landlord total approximately $774,000. The mortgage matures March 2013.

Hometown leases, for an initial annual base rental of $360,000 the
premises occupied by its Lincoln Mercury dealership in Emerson, New Jersey from
Salvatore A. Vergopia and his wife. Mr. Vergopia is a director and a principal
stockholder of the Company.

Private Equity Financing

On July 23, 2001, the Board of Directors voted in favor of raising up to
$1.5 million in a private equity financing through the sale of Units to
accredited investors at a price of $2.00 per Unit. Each Unit consists of two
shares of Class A Common Stock of Hometown plus a warrant to purchase one
additional share at an exercise price of $1.20 per share, exercisable within a
three-year period. On July 19, 2001, agreements were signed with 10 accredited
investors and a total of 974,996 Class A Common shares were issued, as follows:

# of Units # of Shares Issued/
Investor Purchased Total Proceeds

Corey Shaker 35,714 71,428
Steven Shaker 35,714 71,428
Janet Shaker 35,714 71,428
Richard Shaker 35,714 71,428
Joseph Shaker 35,714 71,428
Edward Shaker 35,714 71,428
Edward D. Shaker 35,714 71,428
William C. Muller Trust 100,000 200,000
William Muller, Jr 100,000 200,000
Paul Yamin 37,500 75,000
------- -------
Total 487,498 974,996
------- -------

Corey Shaker, Steven Shaker and William Muller, Jr. are officers of the
Company. Joseph Shaker is a Director of the Company.

This was recorded as an increase in additional paid in capital in July
2001. At December 31, 2001, William Muller, Jr. owes Hometown $30,000. This is
recorded in subscriptions receivable which is a reduction to additional paid in
capital at December 31, 2001.

Legal Proceedings

On or about February 7, 2001, Salvatore A. Vergopia and Edward A.
Vergopia, directors and formerly executive officers of Hometown, and Janet
Vergopia, the wife of Salvatore A. Vergopia (the "Vergopias") filed a complaint
in the Superior Court of New Jersey in Bergen County, against Hometown, its
officers and directors, certain holders of its Class B common stock, and certain
other unnamed persons, alleging breach of two employment agreements, wrongful
termination of employment, breach of a stockholders' agreement and certain other
wrongful conduct, including age discrimination and breach of fiduciary duty. The
Vergopias are seeking back pay, front pay, compensatory, consequential and
punitive damages, in an unspecified amount as well as, reinstatement, injunctive
and other legal and equitable relief.

Hometown has retained litigation counsel to represent us in this action. A
motion has been granted such that only a single shareholder remains as an
individual shareholder defendant. Also, Hometown has filed counterclaims to
recover damages associated with the Vergopia's breaches of certain agreements,
as well as breaches of their fiduciary duties. Discovery is proceeding in this
action.

Hometown believes that the Vergopias commenced this action in response to
our dismissal of both Salvatore A. Vergopia and Edward A. Vergopia from their
officerships and employment positions with Hometown. Hometown and its officers
and directors believe that they have meritorious defenses and are vigorously
defending this action. Hometown does not believe that the eventual outcome of
the case will have a material adverse effect on Hometown's consolidated
financial position or results of operations.

EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL
HOLDERS

The following Summary Compensation Table sets forth all compensation
earned in all capacities, during the fiscal year ended December 31, 2001, 2000
and 1999 by (i) Hometown's Chief Executive Officer and (ii) the four most highly
compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the 2001 fiscal year and whose salary, exceeded
$100,000 (collectively, the "Name Executive Officers").

COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
Annual Compensation
--------------------------------------------------------------------------
Fiscal Annual
Name and Principal Position Year Compensation $ Salary Bonus (1) Other
- ----------------------------------- ------------------ ---------------- -------------- -------------

Corey E. Shaker 2001 250,000 (2) -- 7,000
President and Chief 2000 200,000 -- 7,000
Executive Officer 1999 200,000 -- --

William C. Muller, Jr. 2001 200,000 130,372 --
Regional Vice President- 2000 200,000 -- --
South Division 1999 200,000 -- 3,000

Steven Shaker Regional 2001 118,600 10,000 2,600
Vice President-North 2000 110,000 -- 3,000
Division 1999 100,000 -- --

John J. Stavola 2001 126,250 -- 750
Acting Chief Financial 2000 40,650 -- --
Officer and Secretary(3) 1999 -- -- --

- -------------------------

(1) The amount shown are cash bonuses earned in the specified year. A portion
of these bonuses may be paid in the first quarter of the following year.

(2) Includes amounts paid after year-end.

(3) Was hired July 2000. Replaced in January 2002. Mr. Stavola is currently
the Corporate Controller of Hometown.

OPTION GRANTS IN LAST FISCAL YEAR

Number of Potential Realizable
Shares Value At Assumed Annual
Underlying Percent of Total Rates of Stock Price
Options Options Granted Appreciation for Option
Granted(#) to Employees in Exercise Term(2)
---------- Fiscal Year Price -------
Name (1) 2001 ($/Share) Expiration Date 0% 5% 10%
---- --- ---------------- --------- --------------- -- -- ---

Corey Shaker 25,000 6.9% $1.25 May 2006 -- -- --
Corey Shaker 25,000 6.9% $2.25 May 2006 -- -- --
William C. Muller Jr. 15,000 4.2% $1.25 May 2006 -- -- --
William C. Muller Jr. 15,000 4.2% $2.25 May 2006 -- -- --
Steven Shaker 15,000 4.2% $1.25 May 2006 -- -- --
Steven Shaker 15,000 4.2% $2.25 May 2006 -- -- --
John J. Stavola 7,500 2.1% $1.25 December 2006 -- -- --
John J. Stavola 7,500 2.1% $2.25 December 2006 -- -- --

(1) The options (except for those issued to John J. Stavola) vest with respect
to one-third of the shares of Common Stock covered by the options on May
11, 2002 (the "Initial Vesting Date") and one-third will vest on each of
the second and third anniversary of the Initial Vesting Date. The options
issued to John J. Stavola vest with respect to one-third of the shares of
Common Stock covered by the options on December 1, 2002 (the "Initial
Vesting Date") and one-third will vest on each of the second and third
anniversary of the Initial Vesting Date.

(2) Potential realizable values are net of exercise price but before taxes,
and are based on the assumption that the Common Stock of the Company
appreciates at the annual rate shown (compounded annually) from the date
of grant until the expiration date of the respective options. All the
options issued in 2001 were issued at exercise prices higher than the
market price at the date of issuance - hence the Potentially Realizable
Values are all $0. These numbers are calculated based on Securities and
Exchange Commission requirements and do not reflect the Company's
projection or estimate of future stock price growth. Actual gains, if any,
on stock option exercises are dependent on the future financial
performance of the Company, overall market conditions and the option
holder's continued employment through the vesting period. This table does
not take into account any appreciation in the price of the Common Stock
from the date of grant to the date of this Form 10-K.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

The following table summarizes options exercised during fiscal 2001 and presents
the value of unexercised options held by the Named Executive Officers at fiscal
year end:

Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options Options at Fiscal
at Fiscal Year-End Year-End
Acquired on Value Exercisable (E) Exercisable (E)
Name Exercise Realized Unexercisable (U) Unexercisable (U)
- -------------------------------- ------------- ------------ --------------------- --------------------

Corey E. Shaker ---- ---- 56,500 E ----
President and Chief 60,000 U
Executive Officer

William C. Muller, Jr. ---- ---- 20,000 E ----
Regional Vice President - South 30,000 U

Steven Shaker ---- ---- 10,000 E ----
Regional Vice President - North 30,000 U

John J. Stavola 0 E
Acting Chief Financial 15,000 U
Officer and Secretary (1)

(1) Replaced in January 2002. Mr. Stavola is currently the Corporate
Controller of the Company.

In general, the option agreements shall be exercisable only so long as the
Optionee shall continue to be an employee of Hometown and within the thirty-day
period after the date of termination of his employment to the extent it was
exercisable on the day prior to the date of termination. In the event the
Optionee is unable to continue his employment with Hometown as a result of his
total and permanent disability, he may, but only within three (3) months from
the date of disability, exercise the option to the extent he was entitled to
exercise it at the date of such disability. In the event of death of the
Optionee, the option may be exercised, at any time within twelve (12) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise this option by bequest or inheritance, but only
to the extent of the right that would have accrued had the Optionee continued
living one (1) month after the date of death, provided that at the time of his
death the Optionee is an employee of Hometown and shall have been in Continuous
Status (as defined in Hometown's Stock Option Plan) as an employee from the date
hereof; or within thirty (30) days after the termination of Continuous Status as
an employee, the option may be exercised, at any time within three (3) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.

Employment Contracts

In April 1998, Hometown entered into five-year employment agreements,
effective as of the closing of Hometown's initial public offering in July, 1998,
with Corey E. Shaker, William C. Muller, Jr. and Steven Shaker. The agreements
for Corey E. Shaker and William C. Muller, Jr. provides for an annual base
salary of $200,000 (Corey E. Shaker currently receives compensation of
$250,000). The agreement for Steven Shaker provides for an annual base salary of
$100,000, which increased to $125,000 in 2001.

Each agreement also provides for participation by the employee in all
executive benefit plans and, if employment is terminated without cause (as
defined in the agreement), payment of an amount equal to the salary which would
have been payable over the unexpired term of his employment agreement.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

None of the directors serving on the Compensation Committee are employees
or officers of the Company. Corey Shaker and Stephen A. Zelnick both serve
together on the board of directors of Adstar, Inc. No other director or
executive officer of the Company is a director or executive officer of any other
corporation that has a director or executive officer who is also a director of
the Company.

1998 Stock Option Plan

In February 1998, in order to attract and retain persons necessary for the
success of the Company, Hometown adopted its 1998 Stock Option Plan (the "Stock
Option Plan") covering up to 480,000 shares of Class A Common Stock. Pursuant to
the Stock Option Plan officers, directors and key employees of the Company and
consultants to the Company are eligible to receive incentive and/or non-
incentive stock options. The Board of Directors will administer the Stock Option
Plan, which expires in January 2008, or a committee designated by the Board of
Directors. The selection of participants, allotment of shares, determination of
price and other conditions relating to the purchase of options will be
determined by the Board of Directors, or a committee thereof, in its sole
discretion. Stock options granted under the Stock Option Plan are exercisable
for a period of up to 10 years from the date of grant at an exercise price which
is not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive stock option granted under the Stock
Option Plan to a stockholder owning more than 10% of the outstanding Common
Stock may not exceed five years and its exercise price may not be less than 110%
of the fair market value of the Common Stock on the date of the grant. For
grants to the Named Executive Officers see the chart above titled "AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES."

Employee Benefit Plan

In October 1999, Hometown amended and restated the E.R.R. Enterprises,
Inc. Profit Sharing/401(k) Plan, (the "Amended Plan") into the HOMETOWN AUTO
RETAILERS, INC. 401K Plan (the "Plan") effective October 1, 1999, for the
benefit of eligible employees, as defined. Participants may make voluntary
contributions of up to 15% of their compensation, subject to certain IRS
limitations. Hometown may make annual matching contributions to the Plan at its
discretion. No Contributions were made by Hometown to the Plan for the years
ended December 31, 2001 and 2000. Contributions under the Plan were $48,000 in
1999. Corey E. Shaker and Joseph Shaker are the Trustees of the Plan.

Compensation of Directors

Each non-employee Director receives a fee of $1,000, for each meeting
attended in person and $250 for each meeting attended telephonically and
reimbursement for travel costs and other out-of-pocket expenses incurred in
attending each Directors' meeting. In addition, committee members receive $500
for each committee meeting attended in person, other than meeting directly
following or preceding Board meetings and $125 for each committee meeting
attended telephonically. Additionally, pursuant to the Plan, each Director who
is a non-employee and is not elected pursuant to the stockholders agreement
among Hometown's Class B stockholders, commencing in 2002 will receive options
to purchase 30,000

shares of Common Stock exercisable at the fair market value on the date of
grant. These options will vest one-half on the date of grant and one-half at the
end of the subsequent year of service on the Board. In addition, each
non-employee Director receives options to purchase an additional 2,500 shares of
Common Stock on the date of the Company's annual stockholders' meeting. Such
options will have an exercise price equal to the fair market value of the Common
Stock on the date of grant and will vest one-third upon grant and one-third on
each of the first and second anniversary of the date of grant.

Limitation of Directors' Liability and Indemnification

The Delaware General Corporation Law (the "DGCL") authorizes corporations
to limit or eliminate the personal liability of directors to corporations and
their shareholders for monetary damages for breach of directors' fiduciary duty
of care. The Company's Certificate of Incorporation limits the liability of
Directors of the Company to the Company or its shareholders to the fullest
extent permitted by Delaware law.

The Company's Certificate of Incorporation provides mandatory
indemnification rights to any officer or Director of the Company who, by reason
of the fact that he or she is an officer or Director of the Company, is involved
in a legal proceeding of any nature. Such indemnification rights include
reimbursement for expenses incurred by such officer or Director in advance of
the final disposition of such proceeding in accordance with the applicable
provisions of the DGCL. Insofar as indemnification for liabilities under the
Securities Act may be provided to officers and Directors or persons controlling
the Company, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.

Except for the Vergopia litigation described in Item 3 above, there is no
pending litigation or proceeding involving a Director, officer, employee or
agent of the Company in which indemnification by the Company will be required or
permitted.

Report of the Compensation Committee on Executive Compensation

The primary purposes of the Compensation Committee are to establish and
maintain competitive, fair and equitable compensation practices designed to
attract and retain key management employees throughout the Corporation and to
establish appropriate incentives to motivate and reward key management employees
for achieving or exceeding established performance goals; and to oversee the
competency and qualifications of senior management personnel and the provisions
of senior management succession planning. The Compensation Committee is
responsible for a broad range of activities which include (i) recommending to
the full Board of Directors the salary(ies) of the Chairman of the Board, Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer after an
evaluation of market data, internal salary relationships as provided by the
Corporation's executive compensation professionals, and such other factors as
the Committee deems appropriate; (ii) recommending to the full Board of
Directors the salaries for other elected Corporate Officers and selected key
management employees after reviewing the recommendations made by the Chief
Executive Officer and the Chief Operating Officer; (iii) recommending to the
full Board of Directors the type of incentive plans, if any, which will be
offered to management employees; and (iv) administering the Corporation's 1998
Incentive Stock Option Plan, to include, after reviewing the recommendations of
the Chief Executive Officer and the Chief Operating Officer, determining the
employees to be eligible for plan participation.

Due to the existence of five-year employment agreements between Hometown
and its key officers, which do not expire until July 2003, the scope of the
Compensation Committee's duties has been limited.

COMPENSATION COMMITTEE

Stephen A. Zelnick
As Acting Chairman

CUMULATIVE TOTAL RETURN
AMONG HOMETOWN AUTO RETAILERS, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX

[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]

7/29/98 12/31/98 12/31/99 12/31/00 12/31/01

HOMETOWN AUTO RETAILERS, INC. 100.00 49.29 40.71 5.71 8.80
SIC CODE INDEX 100.00 102.76 65.26 43.26 105.50
NASDAQ MARKET INDEX 100.00 118.38 208.79 131.23 104.61

ASSUMES $100 INVESTED ON JULY 29, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001

The above graph shows a comparison of cumulative total returns for Hometown, the
NASDAQ Market Index, and a Peer Group from the date of the initital public
offering.

(1) The Peer Group Index includes the following companies: Auto Nation Inc.,
Circuit City/CarMax, Group, Group 1 Automotive, Inc., Lithia Motors Inc., Rush
Enterprises, Inc., Sonic Automotive Inc., United Auto Group, Inc. and Nostalgia
Motorcars.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to Hometown
regarding the beneficial ownership of Common Stock as of May 10, 2002 by (i)
each person known to Hometown to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, (ii) each Director of Hometown, (iii) each
Named Executive Officer and (iv) all Directors, and Executive Officers of
Hometown as a group. Except as otherwise indicated, the persons or entities
listed below have sole voting and investment power with respect to all shares of
Common Stock owned by them.

A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this prospectus upon
the exercise of options and warrants or conversion of convertible securities.
Each beneficial owner's percentage ownership is determined by dividing the
number of shares beneficially owned by that person by the total number of shares
beneficially owned, increased to reflect the shares underlying the options,
warrants and convertible securities that are held by such person, but not held
by any other person.

As of May 10, 2002, the total number of shares outstanding is 7,175,105,
of which 3,563,605 shares are Class A common stock and 3,611,500 shares are
Class B common stock.

The total number of votes are based on the combined total of Class A and
Class B common stock beneficially owned by the beneficial owner. The voting
power percentage of each beneficial owner is determined by dividing the number
of votes held by that person by the total number of votes outstanding, increased
to reflect the number of votes of the shares underlying the options, warrants
and convertible securities that are held by such person, but not held by any
other person.

As of May 10, 2002, the total number of votes outstanding is 39,678,605,
of which 3,563,605 votes are from Class A common stock outstanding and
36,115,000 votes are from Class B common stock outstanding; Class A common stock
have one (1) vote per share; and Class B common stock have ten (10) votes per
share.

Common Stock % of
Beneficially Owned % of Outstanding Equity Owned Aggregate
----------------------------- ----------------------------- voting Power
Class Class Class Class of all
Name of Beneficial Owner A B A B Total Classes
- --------------------------------- ----------- ------------------------------------------------ ----------

Officers and Directors
Salvatore Vergopia -- 705,000 -- 19.52 9.83 17.77
Corey E. Shaker 193,310 265,080 5.42 7.34 6.39 7.17
William C. Muller, Jr. 334,250 453,034 9.38 12.54 10.97 12.26
Edward Vergopia -- 235,000 - 6.51 3.28 5.92
Steven Shaker 135,142 206,424 3.79 5.72 4.76 5.54
Joseph Shaker 184,326 321,812 5.17 8.91 7.05 8.58
H. Dennis Lauzon 1,666 -- ** -- ** **
Timothy C. Moynahan 15,000 -- ** -- ** **
Steven A. Fournier 15,000 -- ** -- ** **
All Directors, and Executive
Officers as a group (10 persons) 878,694 2,186,350 24.66 60.54 42.72 57.32

5% Beneficial Owners
William C. Muller, Sr. 300,000 308,786 8.42 8.55 8.48 8.54

** Ownership is less than 1%
- ------------------------------------------------------------------------------------------------------------------------

Salvatore Vergopia has an address at 20 Bayberry Drive, Saddle River, New
Jersey 07458. His beneficial ownership of our Class B common stock includes
225,600 shares owned by his wife Janet.

Edward A. Vergopia has an address at 100 Winston Drive, North Tower,
Cliffside Park, New Jersey 07010.

Corey Shaker has an address at 774 Straits Turnpike, Watertown Connecticut
06795. His beneficial ownership of our common stock includes:

o 265,080 shares of Class B common stock, of which 15,980 shares are
held by the Edward Shaker Family Trust of which he is the Trustee
and a beneficiary;

o 84,428 shares of Class A common stock;

o Options exercisable within the next 60 days to purchase shares of
Class A common stock as follows:

o 36,500 shares at $9.00 per share;

o 20,000 shares at $3.00 per share;

o 8,334 shares at $2.25 per share; and

o 8,334 shares at $1.25 per share; and

o Warrants immediately exercisable to purchase 35,714 shares of Class
A common stock at $1.20 per share.

William C. Muller, Jr. has an address at c/o Muller Toyota Inc., Route 31,
PO Box J, Clinton, New Jersey 08809. His beneficial ownership of our common
stock includes:

o 453,034 shares of Class B common stock;

o 204,250 shares of Class A common stock;

o Options exercisable within the next 60 days to purchase shares of
Class A common stock as follows:

o 20,000 shares at $9.00 per share;

o 5,000 shares at $2.25 per share; and

o 5,000 shares at $1.25 per share; and

o Warrants immediately exercisable to purchase 100,000 shares of Class
A common stock at $1.20 per share.

Steven Shaker has an address at c/o Family Ford, Inc., 1200 Wolcott
Street, Waterbury, Connecticut 06705. His beneficial ownership of our common
stock includes:

o 79,428 shares of Class A common stock;

o Options exercisable within the next 60 days to purchase shares of
Class A common stock as follows:

o 10,000 shares at $9.00 per share;

o 5,000 shares at $2.25 per share; and

o 5,000 shares at $1.25 per share; and

o Warrants immediately exercisable to purchase 35,714 shares of Class
A common stock at $1.20 per share.

Joseph Shaker has an address at c/o Baystate Lincoln Mercury, 571
Worcester Road, Framingham, Massachusetts 01701. His beneficial ownership of our
common stock includes:

o 321,812 shares of Class B common stock of which 15,980 shares are
held by the Richard Shaker Family Trust which Mr. Shaker is the
Trustee and a beneficiary; and 40,000 shares are held by the Shaker
Irrevocable Trust of which Mr. Shaker is Trustee;

o 112,112 shares of Class A common stock;

o an option to purchase 36,500 shares of Class A common stock,
exercisable within the next 60 days at $9.00 per share; and

o Warrants immediately exercisable to purchase 35,714 shares of Class
A common stock at $1.20 per share.

H. Dennis Lauzon has an address at 854 Sunset Avenue, Haworth, New Jersey
07641. His beneficial ownership of our common stock consist of an option to
purchase 1,666 shares of Class A common stock, exercisable within the next 60
days at $0.65 per share.

Timothy C. Moynahan has an address at 141 East Main Street, Waterbury,
Connecticut 06722. His beneficial ownership of our common stock consist of an
option to purchase 15,000 shares of Class A common stock, exercisable within the
next 60 days at $0.48 per share.

Steven A. Fournier has an address at 107 Eastfield Road, Waterbury,
Connecticut 06708. His beneficial ownership of our common stock consist of an
option to purchase 15,000 shares of Class A common stock, exercisable within the
next 60 days at $0.58 per share.

William Muller, Sr. has an address at c/o Muller Toyota Inc., Route 31, PO
Box J, Clinton, New Jersey 08809. His beneficial ownership of our common stock
includes:

o 308,786 shares of Class B common stock;

o 200,000 shares of Class A common stock; and

o Warrants immediately exercisable to purchase 100,000 shares of Class
A common stock at $1.20 per share.

All shares and warrants are owned by The William C. Muller Revocable
Living Trust of which the William C. Muller Sr. is Trustee. William C. Muller
Sr. is neither an officer nor director.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Hometown's
officers and directors, and persons who own more than ten percent of a
registered class of Hometown's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish Hometown with copies of all Section 16(a) forms they
file.

To the best of Hometown's knowledge, based solely on review of the copies
of such forms furnished to Hometown, or written representations that no other
forms were required, Hometown believes that all Section 16(a) filing
requirements applicable with respect to all its current officers, directors and
ten percent shareholders have been complied with as of the filing date of this
Annual Report. However, Corey Shaker, Joseph Shaker, Steven Shaker and William
Muller, Jr. were late in filing one (1) Statement of Changes in Beneficial
Ownership on Form 4 during 2001 but have all subsequently come into compliance.
With respect to any former directors, officers, and ten percent shareholders of
Hometown, the Company does not have any knowledge of any known failures to
comply with the filing requirements of Section 16(a).

Audit Committee Report

The Audit Committee has reviewed Hometown's audited statements for the
year ended December 31, 2001. In conjunction with its review, the Audit
Committee has met with the management of Hometown to discuss the audited
financial statements. In addition, Hometown has discussed with its independent
auditors, Arthur Andersen LLP, the matters required pursuant to Statement on
Accounting Standards No. 61 and has received the written disclosures and the
letter from Arthur Andersen LLP required by the Independence Standards Board No.
1. The Audit Committee has also discussed with Arthur Andersen LLP its
independence from management and Hometown. Arthur Andersen LLP has full and free
access to the Audit Committee.

Based on this review and discussion, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in
Hometown's Annual Report on Form 10-K for the fiscal year ended December 31,
2001 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE:

Timothy C. Moynahan
Steven A. Fournier

Audit Fees

The aggregate fees and expenses billed for the professional services
rendered by Arthur Andersen LLP for the audit of Hometown's annual financial
statements included in Hometown's Form 10-K filing for fiscal year 2001 and the
reviews of Hometown's quarterly financial statements included in Hometown's Form
10-Q filings for fiscal year 2001 totaled $185,000.

Financial Information System Design and Implementation Fees

Hometown did not incur any fees for professional services rendered by
Arthur Andersen LLP in connection with information systems design and
implementation during the 2001 fiscal year.

All Other Fees

Other than $4,500 in fees associated with Hometown's filing on Form S-3,
Hometown did not incur any other fees for professional services rendered by
Arthur Andersen LLP other than the services covered in the paragraph above
titled "Audit Fees".

Audit Committee Consideration

Hometown's Audit Committee has considered whether Arthur Andersen LLP's
provision of the services which generated the Audit and Other Fees reported
above was compatible with maintaining Arthur Andersen LLP 's independence as
Hometown's principal independent accounting firm.

Work Performed by Principal Accountant's Full Time Permanent Employees

Arthur Andersen LLP's services rendered in performing Hometown's audits
for fiscal year 2001 were performed by full time, permanent employees and
partners of Arthur Andersen LLP. In response to our request, we have been
advised by Arthur Andersen that a representative of Arthur Andersen LLP will not
be at the annual meeting. We have also been advised by BDO Seidman LLP that a
representative of BDO Seidman LLP will be at the annual meeting and will have an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

On June 20, 2002, the Company dismissed Arthur Andersen LLP as the
Company's independent public accountants and on July 11, 2002 appointed BDO
Seidman LLP as the Company's new independent public accountants for the fiscal
year 2002. This change was made upon the recommendation of the Audit Committee
of the Company's Board of Directors and with the approval of the Company's Board
of Directors. The decision to change independent public accountants was based on
the continuing uncertainty regarding Andersen's future.

Although stockholder approval is not required, the Company desires to
obtain from the stockholders an indication of their approval or disapproval of
the Board of Directors' action in appointing BDO Seidman LLP as the independent
public accountants of the Company and its subsidiaries. If the stockholders do
not ratify this appointment, such appointment will be reconsidered by the Audit
Committee and the Board of Directors. The proxy will be voted as specified, and
if no specification is made, the proxy will be cast "For" this proposal.

The Board Unanimously Recommends A Vote FOR The Ratification of the Appointment
of BDO Seidman LLP for Fiscal Year 2002.

PROPOSAL NO. 3

APPROVAL OF AMENDMENT TO THE HOMETOWN 1998 STOCK OPTION PLAN
TO INCREASE AUTHORIZED SHARES

The Board of Directors on June 11, 2002 adopted resolutions approving an
amendment to Hometown's 1998 Stock Option Plan to increase the number of shares
available for issuance thereunder from 480,000 to 830,000 shares and directing
that the proposed amendment be submitted to a vote of the stockholders at the
Annual Meeting. The Board of Directors determined that the amendment is in the
best interests of the Company and unanimously recommends approval by the
stockholders.

Background and Reasons for the Proposal

The maximum number of shares as to which options may, at any time, be
granted under the Stock Option Plan is 480,000 shares of Hometown common stock.
At June 24, 2002, incentive stock options covering 586,750 shares were issued
and outstanding under the Stock Option Plan. Accordingly, at June 24, 2002, 0
shares remained available for grant and/or issuance under the Stock Option Plan.
In addition, the status as incentive stock options for 106,750 are subject to
approval by this amendment, and are held by Corey E. Shaker (50,000), John S.
Stavola (15,000), by one other officer (31,750) and one employee (10,000). In
order to continue Hometown's program of stock-based incentive compensation for
its executive officers and employees, the Board of Directors has approved an
amendment to the Stock Option Plan increasing the number of shares available for
issuance and/or grant thereunder from 480,000 to 830,000.

The Board Unanimously Recommends A Vote FOR The Approval of an Amendment to the
Hometown 1998 Stock Option Plan increasing the number of shares of common stock
available for issuance thereunder.

MISCELLANEOUS

Stockholder Proposals

Stockholder proposals intended to be presented at Hometown's 2003 Annual
Meeting must be received by Hometown for inclusion in Hometown's proxy statement
relating to that meeting not later than March 31, 2003. Such proposals should be
addressed to Charles F. Schwartz, Chief Financial Officer, Hometown Auto
Retailers, Inc., 774 Straits Turnpike, Watertown, Connecticut, 06795.

Other Matters

Management knows of no other business which will be presented for
consideration at the Annual Meeting other than that stated in the notice of
meeting.

Solicitation Of Proxies

The cost of this proxy solicitation and any additional material relating
to the meeting which may be furnished to the stockholders will be borne by
Hometown. In addition, solicitation by telephone, telegraph or other means may
be made personally, without additional compensation, by officers, directors and
regular employees of Hometown. Hometown also will request brokers, dealers,
banks and voting trustees and their nominees holding shares of record but not
beneficially to forward proxy soliciting material to beneficial owners of such
shares, and Hometown, upon request, will reimburse them for their expenses in so
doing.

Reports And Financial Statements

Hometown's Annual Report for the year ended 2001, including Audited
Financial Statements is included with this proxy material. The Financial
Statements contained in the Annual Report are incorporated by reference and are
part of this soliciting material.

A copy of Hometown's Annual Report to the Securities and Exchange
Commission on Form 10-K, without exhibits, will be provided without charge to
any stockholder submitting a written request. Such request should be addressed
to Charles F. Schwartz, Chief Financial Officer, Hometown Auto Retailers, Inc.,
774 Straits Turnpike, Watertown, Connecticut, 06795.

EVERY STOCKHOLDER, WHETHER OR NOT HE OR SHE EXPECTS TO ATTEND THE ANNUAL
MEETING IN PERSON, IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Corey E. Shaker
Corey E. Shaker, President and
Chief Executive Officer

Dated: Watertown, Connecticut
July 11, 2002

APPENDIX I (FORM OF PROXY)

HOMETOWN AUTO RETAILERS, INC.
P R O X Y
FOR ANNUAL MEETING OF THE STOCKHOLDERS
August 27, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Corey E. Shaker and Charles F. Schwartz, and
each of them, with full power of substitution, as proxies to vote the shares
which the undersigned is entitled to vote at the Annual Meeting of the
Stockholders of Hometown Auto Retailers, Inc. ("Hometown") to be held at the
Hilton of Southbury, 1284 Strongtown Road, Southbury, Connecticut 06488, on
Tuesday, August 27, 2002 at 10:00 A.M., Eastern Daylight Time and at any
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of Hometown held or owned by the undersigned as indicated
on the proposals as more fully set forth in the Proxy Statement, and in their
discretion upon such other matters as may come before the meeting.

Please mark "X" your votes as indicated :

1) ELECTION OF DIRECTORS: Corey E. Shaker, William C. Muller, Jr., Joseph
Shaker, Salvatore Vergopia, Edward A. Vergopia, H. Dennis Lauzon, Timothy C.
Moynahan and Steven A. Fournier

FOR election of all nominees |_|

WITHHOLD vote from all nominees |_|

FOR all nominees,
EXCEPT for nominee(s) listed below from whom Vote is withheld.

- --------------------------------------------------------------

2) RATIFICATION of the Appointment of BDO Seidman LLP for Fiscal Year 2002.
FOR |_| AGAINST |_| ABSTAIN |_|

3) APPROVAL of an Amendment to the Hometown 1998 Stock Option Plan increasing by
350,000 the number of shares of common stock available for issuance thereunder.
FOR |_| AGAINST |_| ABSTAIN |_|

(Continued, and to be signed, on the Reverse Side)

- --------------------------------------------------------------------------------

FOLD HERE

II-1

THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSAL.

The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.

Dated: , 2002

---------------------------------------------------
Signature of Stockholder

NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.

IMPORTANT - PLEASE FILL IN, SIGN AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.

II-2

APPENDIX II (AUDIT COMMITTEE CHARTER)

CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS

I. PURPOSE AND SCOPE

The primary purposes of the Audit Committee are, on behalf of the Board of
Directors and through the oversight of the independent auditors: (1) to obtain a
reasonable level of assurance that the Corporation's financial reports,
practices, procedures and controls are within acceptable limits of sound
practice and in accordance with the statutes, regulations, or statements of the
Financial Accounting Standards Board, the Securities and Exchange Commission,
the NASDAQ Stock Market and other relevant agencies and; and (2) to review such
reports, practices, procedures and controls at least annually and at such other
times if so desired by the Committee to gain insight as to the financial health
of the Corporation and important factors and trends related thereto and
compliance with the Corporation's practices for managing legal and regulatory
compliance.

The Board of Directors shall annually appoint an Audit Committee, which
shall consist of not less than three members of the Board of Directors. Members
may not be officers of the Corporation or any of its subsidiaries and also shall
be independent of management. At the time of appointment of the Committee, the
Directors shall designate one of the members of the Committee to be its
Chairman, to serve until a successor is designated. The Committee has the
authority to retain counsel and experts as deemed appropriate.

II. DUTIES AND RESPONSIBILITIES

The Audit Committee is responsible for a broad range of activities which
include:

o Recommend to the Board the selection, retention or termination of
the Corporation's independent public accountants.

o Discuss and approve the scope of professional services provided by
the independent public accountants and consider the possible effect
of the performance of such service on the independence of the public
accountants.

o Discuss and approve the arrangements (including the estimated fee)
and the proposed overall scope of the annual audit with management
and the independent public accountants.

o Review and concur in the appointment, replacement, reassignment, or
dismissal of the Corporation's Chief Financial Officer.

o Discuss matters of concern to the Audit Committee, the independent
public accountants or management relating to the annual financial
statements or other results of the audit.

o Consider and review with the independent public accountants and the
Corporation's Chief Financial Officer their options as to the
adequacy of the Corporation's system of internal accounting
controls.

o Review with management and the independent public accountants at the
completion of the annual examination:

--> The Corporation's annual financial statements and related
footnotes.

--> The independent public accountants' audit of the financial
statements and their report thereon.

--> The independent public accountants' management letter with
respect to the audit and proposals for changes emanating
therefrom.

II-3

--> Any significant changes required in the independent public
accountants' audit plan.

--> Any serious difficulties or disputes with management
encountered during the course of the audit.

--> Other matters related to the conduct of the audit which are to
be communicated to the Audit Committee under generally
accepted auditing standards.

Consider and review with management and the Corporation's Chief
Financial Officer:

--> The scope of the annual audit plan:

--> Significant findings during the year and management's
responses thereto.

--> Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information.

--> Any changes required in the planned scope of their audit plan.

o Review with the independent public accountants the methods of
establishing and monitoring the Corporation's policies to prohibit
unethical, questionable or illegal activities by employees of the
Corporation.

o Review with management and the independent public accountants the
anticipated effect of any material changes in accounting policies or
standards as well as any unusual or significant commitments or
contingent liabilities.

o Review, with the Corporation's counsel, any legal matters that could
have a significant impact on the Corporation's financial statements.

o Meet with the independent public accountants in separate executive
sessions to discuss any matters that the Audit Committee or the
independent public accountants believe should be discussed privately
with the Audit Committee.

The Audit Committee will perform such other functions as assigned by law,
the Corporation's charter or bylaws, or the Board of Directors.

III. OPERATING PROCEDURES

The operating procedures for this Committee with respect to meetings,
Notice of Meetings, Quorums and Manner of Acting, and Records shall be the
same as stipulated for the Board as spelled out in the Corporation's
By-laws.

IV. ACCOUNTABILITY

This Committee shall report to the Board of Directors at its next regular
meeting all such actions it has taken since the previous report.

II-4