SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant |X|
Filed by a Party other than the Registrant | |

Unidigital Inc.
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(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than 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)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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| | Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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UNIDIGITAL INC.
545 West 45th Street
New York, New York 10036

December 23, 1997

To Our Stockholders:

You are most cordially invited to attend the 1998 Annual Meeting of
Stockholders of Unidigital Inc. at 9:30 A.M., local time, on Thursday, January
29, 1998, at the offices of the Company, 545 West 45th Street, 2nd Floor, New
York, New York.

The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented to the meeting.

It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy in the enclosed envelope, which requires no postage if mailed in the
United States, as soon as possible. Your stock will be voted in accordance with
-- ---- -- --------
the instructions you have given in your proxy.

Thank you for your continued support.

Sincerely,

/s/ William E. Dye
William E. Dye
Chairman of the Board, President
and Chief Executive Officer

UNIDIGITAL INC.
545 West 45th Street
New York, New York 10036

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 29, 1998

The Annual Meeting of Stockholders (the "Meeting") of Unidigital Inc., a
Delaware corporation (the "Company"), will be held at the offices of the
Company, 545 West 45th Street, 2nd Floor, New York, New York, on Thursday,
January 29, 1998, at 9:30 A.M., local time, for the following purposes:

(1) To elect five directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;

(2) To amend the Company's 1997 Equity Incentive Plan (the "1997 Plan") to
increase the maximum number of shares of Common Stock available for
issuance under the 1997 Plan from 300,000 to 500,000 shares and to reserve
an additional 200,000 shares of Common Stock of the Company for issuance
upon the exercise of stock options granted under the 1997 Plan;

(3) To ratify the appointment of Ernst & Young LLP as independent certified
public accountants for the year ending August 31, 1998; and

(4) To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.

Holders of Common Stock of record at the close of business on December 10,
1997 are entitled to notice of and to vote at the Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at the Company's principal executive offices at
545 West 45th Street, New York, New York, 10036 for a period of 10 days prior to
the Meeting and at any time during the Meeting. The Meeting may be adjourned
from time to time without notice other than by announcement at the Meeting.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.

By Order of the Board of Directors

/s/ Peter Saad
Peter Saad
Assistant Secretary

New York, New York
December 23, 1997

THE COMPANY'S 1997 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.

UNIDIGITAL INC.
545 West 45th Street
New York, New York 10036
--------------------------------------------
P R O X Y S T A T E M E N T
--------------------------------------------

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Unidigital Inc. (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders of the Company to be held on January 29,
1998 (the "Meeting") at the offices of the Company, 545 West 45th Street, New
York, New York at 9:30 A.M., local time, and at any adjournment or adjournments
thereof. Holders of record of common stock, $.01 par value ("Common Stock"), as
of the close of business on December 10, 1997, will be entitled to notice of and
to vote at the Meeting and any adjournment or adjournments thereof. As of that
date, there were 3,243,243 shares of Common Stock issued and outstanding and
entitled to vote. Each share of Common Stock is entitled to one vote on any
matter presented at the Meeting.

If proxies in the accompanying form are properly executed and returned, the
Common Stock represented thereby will be voted in the manner specified therein.
If not otherwise specified, the Common Stock represented by the proxies will be
voted (i) FOR the election of the five nominees named below as Directors, (ii)
FOR a proposal to amend the Company's 1997 Equity Incentive Plan (the "1997
Plan"), to increase the maximum number of shares of Common Stock available for
issuance under the 1997 Plan from 300,000 to 500,000 shares and to reserve an
additional 200,000 shares of Common Stock of the Company for issuance upon the
exercise of stock options granted under the 1997 Plan, (iii) FOR the
ratification of the appointment of Ernst & Young LLP as independent certified
public accountants for the year ending August 31, 1998, and (iv) in the
discretion of the person named in the enclosed form of proxy, on any other
proposals which may properly come before the Meeting or any adjournment or
adjournments thereof. Any Stockholder who has submitted a proxy may revoke it at
any time before it is voted, by written notice addressed to and received by the
Assistant Secretary of the Company, by submitting a duly executed proxy bearing
a later date or by electing to vote in person at the Meeting. The mere presence
at the Meeting of the person appointing a proxy does not, however, revoke the
appointment.

The presence, in person or by proxy, of holders of Common Stock having a
majority of the votes entitled to be cast at the Meeting shall constitute a
quorum. The affirmative vote of holders of a plurality of the shares of Common
Stock represented at the Meeting is required for the election of Directors,
provided a quorum is present in person or by proxy. All actions proposed herein
other than the election of Directors may be taken upon the affirmative vote of
Stockholders possessing a majority of the voting power represented at the
Meeting, provided a quorum is present in person or by proxy.

Abstentions are included in the shares present at the Meeting for purposes
of determining whether a quorum is present, and are counted as a vote against
for purposes of determining whether a proposal is approved. Broker non-votes
(when shares are represented at the Meeting by a proxy specifically conferring
only limited authority to vote on certain matters and no authority to vote on
other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved and thus have no effect on the outcome.

This Proxy Statement, together with the related proxy card, is being mailed
to the Stockholders of the Company on or about December 23, 1997. The Annual
Report to Stockholders of the Company for the year ended August 31, 1997,
including financial statements (the "Annual Report"), is being mailed together
with this Proxy Statement to all Stockholders of record as of December 10, 1997.
In

addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report so that such record holders could supply such materials to beneficial
owners as of December 10, 1997.

ELECTION OF DIRECTORS

At the Meeting, five Directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Stockholders and until their successors shall have
been duly elected and qualified.

It is the intention of the persons named in the enclosed form of proxy to
vote the Common Stock represented thereby, unless otherwise specified in the
proxy, for the election as Directors of the persons whose names and biographies
appear below. All of the persons whose names and biographies appear below are at
present Directors of the Company. In the event any of the nominees should become
unavailable or unable to serve as a Director, it is intended that votes will be
cast for a substitute nominee designated by the Board of Directors. The Board of
Directors has no reason to believe that the nominees named will be unable to
serve if elected. Each of the nominees has consented to being named in this
Proxy Statement and to serve if elected.

The current members of the Board of Directors and nominees for election to
the Board are as follows:

Served as a Positions with
Name Age Director since the Company
- ---- --- -------------- --------------
William E. Dye............ 35 1989 President, Chief Executive
Officer, Chairman of the Board
and Director

Peter Saad................ 50 1996 Senior Vice President, Chief
Operating Officer, Assistant
Secretary and Director

Anthony Manser............ 40 1995 Vice President and Director

Harvey Silverman.......... 56 1996 Director

David Wachsman............ 54 1996 Director

There are no family relationships between any of the Directors and
executive officers of the Company.

The principal occupations and business experience, for at least the past
five years, of each Director and nominee is as follows:

William E. Dye has been a Director of the Company since its inception. In
addition, Mr. Dye has been President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since its inception. Mr. Dye also served
as the Company's Chief Financial Officer from approximately July 1995 until July
1996. He has been President and Chairman of the Board of Directors of
LinoGraphics Corporation, a predecessor company to the Company, since he
co-founded it in 1989. From 1987 to 1989, he was Executive Vice President of
Micro Enhancement Systems, a computer firm located in New York City providing
consulting services to the graphic arts and other industries. From 1986 to 1987,
Mr.

- 2 -

Dye served as Vice President and General Manager of Tripledge Wiper Corp., an
automobile parts manufacturer. From 1985 to 1986, Mr. Dye taught economics at
the International School of Geneva, Switzerland.

Peter Saad has been a Director of the Company since February 1996. In
addition, Mr. Saad has served as the Senior Vice President and Chief Operating
Officer of the Company since November 1996 and as the Company's Assistant
Secretary since April 1997. Mr. Saad previously served as the Managing Director
of Martin Bierbaum Money Markets, Inc., a money management firm, from March 1993
to June 1997, and was a Director of Martin Brokers, Inc., a subsidiary of Trio
Holdings Plc, from March 1993 to June 1997. He is also the President of
Independence Group Inc., a New York-based owner of indoor sports facilities, a
position he has held since 1988.

Anthony Manser has been Vice President and Director of the Company since
its inception. He has been the Managing Director of Elements (UK) Limited, a
wholly-owned U.K. subsidiary of the Company, since its inception in 1994 and was
a Director of Lyledale Limited ("Lyledale") since 1991 and a Managing Director
of Lyledale from 1993 to 1994. From 1985 to 1991, he was Production Director of
Fingerprint Graphics, a United Kingdom graphics company.

Harvey Silverman has been a Director of the Company since February 1996. He
has held various positions at Spear, Leeds & Kellogg, since 1963, and is
currently its Senior Managing Director. Spear, Leeds & Kellogg is a
broker-dealer engaged in the specialist and clearing businesses on major United
States stock exchanges. Mr. Silverman also serves as a Director of World Wide
Entertainment & Sports and as Vice Chairman, Director and member of the
Performance Committee of the Options Clearing Corporation.

David Wachsman has been a Director of the Company since February 1996. He
is Chairman of the Board, President and Chief Executive Officer of Protex
International Corp., a New York-based manufacturer of security devices for
retail stores. He has been with Protex International Corp. since 1984. Mr.
Wachsman is a certified public accountant.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS.

COMMITTEES AND MEETINGS OF THE BOARD

The Board of Directors has established an Audit Committee, a Compensation
Committee and an Option Committee. The Audit Committee, which consists of
Messrs. Dye, Silverman and Wachsman, reviews the results and scope of the audit
and other services provided by the Company's independent certified public
accountants. The Compensation Committee, which also consists of Messrs. Dye,
Silverman and Wachsman, makes recommendations concerning salaries and certain
incentive compensation for management-level employees of the Company. The Option
Committee, which consists of Messrs. Silverman and Wachsman, administers the
Company's stock option plans.

There were four meetings of the Board of Directors during the fiscal year
ended August 31, 1997. The Audit Committee and the Compensation Committee each
held one meeting during the fiscal year ended August 31, 1997. There were no
meetings of the Option Committee during the fiscal year ended August 31, 1997.
Each incumbent Director attended at least 75% of the aggregate of all meetings
of the Board of Directors held during the period in which he served as a
Director and the total number of meetings held by all committees of the Board of
Directors on which he served during such period, if applicable.

- 3 -

COMPENSATION OF DIRECTORS

Non-Employee Directors receive $250 per meeting attended and are eligible
to receive options pursuant to the 1997 Non-Employee Director Stock Option Plan
(the "Non-Employee Plan") as compensation for serving on the Company's Board of
Directors. All Directors are entitled to reimbursement for reasonable expenses
incurred in connection with attendance at meetings of the Board of Directors or
its Committees.

On October 28, 1996 the Board of Directors adopted, and on January 30, 1997
the Stockholders approved, the Non-Employee Plan. The Non-Employee Plan provides
for the grant of options to purchase a maximum of 75,000 shares of Common Stock
of the Company to Non-Employee Directors of the Company. The Non-Employee Plan
is administered by the Board of Directors. The following Directors have been
granted options under the Non-Employee Plan to date:

Number of Shares
Underlying Options Exercise Price
Director Granted Grant Date Per Share
- -------- ------- ---------- ---------

Mr. Silverman....... 5,000 January 30, 1997 $5.125
Mr. Wachsman........ 5,000 January 30, 1997 $5.125

Under the terms of the Non-Employee Plan, each Non-Employee Director who
was a member of the Board of Directors on the effective date of the Company's
initial public offering and remained a member of the Board of Directors after
the approval of the Non-Employee Plan by the Company's Stockholders on January
30, 1997 (the "Approval Date") was automatically granted, as of the Approval
Date, an option to purchase 5,000 shares of Common Stock, at an exercise price
per share equal to the then fair market value of the shares. In addition, each
Non-Employee Director who first becomes a member of the Board of Directors after
the Approval Date, shall automatically be granted, on the date such person
becomes a member of the Board of Directors, an option to purchase 2,500 shares
of Common Stock, at an exercise price per share equal to the then fair market
value of the shares. Each Non-Employee Director who is a member of the Board of
Directors on the first trading day of each year, commencing in January 1998,
shall also automatically be granted on such date, without further action by the
Board of Directors, an option to purchase 2,500 shares of Common Stock, at an
exercise price per share equal to the then fair market value of the shares.

Unless a shorter period is provided by the Board of Directors, all options
become exercisable three months after the date of grant, provided that the
optionee remains a Director at such time. The right to exercise annual
installments of options will be reduced proportionately based on the optionee's
actual attendance at Directors' meetings if the optionee fails to attend at
least 80% of the Board of Directors' meetings held in any fiscal year. The term
of each option will be for a period of ten years from the date of grant, unless
sooner terminated in accordance with the Non-Employee Plan. Options may not be
transferred except by will or by the laws of descent and distribution or
pursuant to a domestic relations order and are exercisable to the extent vested
at any time prior to the scheduled expiration date of the option. The
Non-Employee Plan terminates on the earlier of January 30, 2007 or at such time
as all shares of Common Stock currently or hereafter reserved for issuance shall
have been issued.

- 4 -

EXECUTIVE OFFICERS

The following table identifies the current executive officers of the
Company:

Capacities in In Current
Name Age Which Served Position Since
- ---- --- ------------- --------------
William E. Dye....... 35 President, Chief Executive 1989
Officer, Chairman of the Board
and Director

Peter Saad........... 50 Senior Vice President, Chief 1996
Operating Officer, Assistant
Secretary and Director

Anthony Manser ...... 40 Vice President and Director 1994 (Member
of the Board
since 1995)

There are no family relationships between any of the Directors and
executive officers of the Company. Executive officers of the Company are elected
annually by the Board of Directors and serve until their successors are duly
elected and qualified.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors, officers and Stockholders who
beneficially own more than 10% of any class of equity securities of the Company
registered pursuant to Section 12 of the Exchange Act (collectively, the
"Reporting Persons") to file initial statements of beneficial ownership of
securities and statements of changes in beneficial ownership of securities with
respect to the Company's equity securities with the Securities and Exchange
Commission (the "SEC"). All Reporting Persons are required by SEC regulation to
furnish the Company with copies of all reports that such Reporting Persons file
with the SEC pursuant to Section 16(a).

Based solely on the Company's review of the copies of such forms received
by the Company and upon written representations of the Company's Reporting
Persons received by the Company, Stephen J. McErlain, a beneficial owner of more
than 10% of the Company's Common Stock, and Kevin H. Rich, a former executive
officer of the Company, did not report on a timely basis certain 1997
transactions.

In particular, Mr. McErlain failed to report on a Form 4 "Statement of
Changes in Beneficial Ownership" ("Form 4") the sale on April 22, 1997 of 31,892
shares directly held by him, at a price per share of $5.25. Mr. McErlain also
failed to report on a Form 4 the sale on July 25, 1997 of 32,430 shares directly
held by him, at a price per share of $6.00. Such transactions were reported late
on a Form 4 which was filed with the SEC on December 11, 1997. Mr. Rich failed
to report on a Form 4 the termination of his options to purchase 10,000 shares
of Common Stock at an exercise price of $5.50 per share.

- 5 -

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION IN FISCAL 1997, 1996 AND 1995

The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to (i)
the Company's Chief Executive Officer and (ii) the two most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000 and who were serving as executive officers at the end of fiscal 1997
(collectively, the "Named Executives") during the fiscal years ended August 31,
1995, 1996 and 1997.

- --------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------
Long-Term
Compensation
------------
Awards
Annual Compensation ------------
--------------------------------------- Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options
(a) (b) ($)(c) ($)(d) ($)(e) (#)(g)
- -------------------------------- ---- -------- ------- ------------ ------------

William E. Dye, President, Chief 1997 $270,577 $--(2) $--(5) --
Executive Officer and Chairman 1996 $295,000 $-- $40,800 --
of the Board(1)................. 1995 $440,477 $20,000 $-- --

Anthony Manser, 1997 $177,120 $-- $--(5) --
Vice President(3) .............. 1996 $148,445 $-- $-- 20,000
1995 $ 74,000 $-- $-- --
Peter Saad,
Senior Vice President, Chief 1997 $216,154 $-- $--(5) 100,000
Operating Officer and Assistant 1996 $-- $-- $-- --
Secretary(4).................... 1995 $-- $-- $-- --
- --------------------------------------------------------------------------------------------------------------
<FN>
(1) William E. Dye entered into an Employment Agreement with the Company
effective January 1, 1996. See -- "Employment Contracts and Termination of
Employment, and Change-in-Control Arrangements."

(2) The $25,000 bonus granted to Mr. Dye by the Company's Board of Directors
was forgone by Mr. Dye.

(3) Anthony Manser entered into a new Employment Agreement with the Company
effective March 1, 1997. See --"Employment Contracts and Termination of
Employment, and Change-in-Control Arrangements."

(4) Peter Saad entered into an Employment Agreement with the Company effective
March 1, 1997. See -- "Employment Contracts and Termination of Employment,
and Change-in-Control Arrangements."

(5) The costs of certain benefits are not included because they did not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus as
reported above.
</FN>

- 6 -

OPTION GRANTS IN FISCAL 1997

The following table sets forth information concerning individual grants of
stock options made pursuant to the Company's 1995 Long-Term Stock Investment
Plan during fiscal 1997 to each of the Named Executives. The Company has never
granted any stock appreciation rights.

- ------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------------------------------------------------------

Percent of Total
Number of Securities Options Granted Exercise Or
Underlying Options To Employees In Base Price Expiration
Granted (#) Fiscal Year ($/Sh) Date
Name (a) (b) (c)(2) (d) (e)
- ------------------------- -------------------- ---------------- ----------- ----------

William E. Dye........... -- -- -- --

Anthony Manser........... -- -- -- --

Peter Saad(1) ........... 100,000 60.9% $4.50 11/15/06
- ------------------------------------------------------------------------------------------------------------
<FN>
(1) The options disclosed herein were granted as incentive stock options.
50,000 of such options became exercisable on March 1, 1997, 25,000 of such
options became exercisable on September 1, 1997 and 25,000 of such options
become exercisable on March 1, 1998. The options terminate on the
expiration date, subject to earlier termination on the optionee's death,
disability or termination of employment with the Company. Options are not
assignable or otherwise transferable except by will or the laws of descent
and distribution.

(2) Based on an aggregate of 164,103 options granted to employees in 1997,
including options granted to the Named Executives.
</FN>

AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning each exercise of
options during fiscal 1997 by each of the Named Executives and the fiscal
year-end number and value of unexercised in-the-money options held by each of
the Named Executives.

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

Number of Securities Value of Unexercised
Underlying In-The-Money Options at
Unexercised Options Fiscal
at Fiscal Year-End Year-End
(#) ($)(1)
Shares Acquired Exercisable/ Exercisable/
on Exercise Value Realized($) Unexercisable Unexercisable
Name (a) (#)(b) (c) (d) (e)
- ------------------------- --------------- ----------------- -------------------- -----------------------

William E. Dye........... -- -- -- --

Anthony Manser........... -- -- 13,333/6,667 $13,333/$6,667

Peter Saad............... -- -- 50,000/50,000(2) $162,500/$162,500
- --------------------------------------------------------------------------------------------------------------------------
<FN>

(1) Based on a closing price of $7.75 per share of Common Stock as listed on
the Nasdaq National Market at August 29, 1997.

(2) 25,000 of such options became exercisable on September 1, 1997.
</FN>

- 7 -

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS

Effective January 1, 1996 the Company entered into an employment agreement
with William E. Dye, pursuant to which he serves as President and Chief
Executive Officer of the Company for a period of five years. Mr. Dye's agreement
provides for a base annual salary of $250,000 and an annual bonus at the
discretion of the Compensation Committee. In fiscal 1997, the Board of Directors
adjusted Mr. Dye's annual base salary to $300,000 and awarded Mr. Dye a bonus of
$25,000. Such $25,000 bonus was forgone by Mr. Dye. In addition, Mr. Dye will be
entitled to severance compensation in an amount equal to his annual base salary
for the remainder of the term or 2.49 times his annual base salary whichever is
greater in the event his employment is terminated by the Company without cause
or if the Company materially breaches the agreement or if Mr. Dye is not elected
a Director. In the event Mr. Dye is terminated by the Company coincident with a
"change of control," he will be entitled to severance compensation equal to 2.99
times his annual base salary. The agreement contains confidentiality provisions
and a non-compete provision which prohibits Mr. Dye from competing with the
Company for a period of two years subsequent to termination of employment. The
Company may terminate the agreement for cause upon material breach of the
employment agreement, willful misconduct or felony conviction.

Effective March 1, 1997, the Company entered into a two-year employment
agreement with Anthony Manser, pursuant to which he serves on a full-time basis
as Vice President and a Director of U.K. operations. The agreement provides for
a base annual salary of (pound)120,000, utilizing the 12-month average exchange
rate in place at August 31, 1997, $196,800, and contains non-competition,
non-solicitation and confidentiality provisions.

Effective March 1, 1997, the Company entered into a two-year employment
agreement with Peter Saad, pursuant to which he serves as the Senior Vice
President and Chief Operating Officer of the Company. The agreement provides for
a base annual salary of $200,000 and contains non-competition, non-solicitation
and confidentiality provisions.

- 8 -

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

There are, as of December 10, 1997, approximately 37 holders of record and
366 beneficial holders of the Company's Common Stock. The following table sets
forth certain information, as of December 10, 1997, regarding the beneficial
ownership of the Company's Common Stock by (i) each person known by the Company
to beneficially own more than 5% of the total number of shares of Common Stock
outstanding as of such date, (ii) each of the Company's Directors (which
includes all nominees) and Named Executives, and (iii) all Directors and current
executive officers as a group.

Name and Address Amount and Nature Percent
of Beneficial Owner (1) of Beneficial Ownership(1) of Class(2)
- ----------------------- -------------------------- -----------
(i) Certain Beneficial Owners:

Stephen J. McErlain................. 688,100(3) 21.2%
31 West 10th Street
New York, New York 10011

Wellington Management Company, LLP.. 247,000 7.6
75 State Street
Boston, Massachusetts 02109

Putnam Investment Management........ 235,400 7.3
One Post Office Square
Boston, Massachusetts 02109

(ii) Directors (which includes
all nominees)and Named
Executives:

William E. Dye...................... 1,051,421(4) 32.4
545 West 45th Street
New York, New York 10036

Peter Saad.......................... 75,000(5) 2.3
545 West 45th Street
New York, New York 10036

Anthony Manser...................... 167,060(6) 5.1
545 West 45th Street
New York, New York 10036

Harvey Silverman.................... 20,000(7) *
120 Broadway
New York, New York 10271

David Wachsman...................... 20,000(7) *
180 Keyland Court
Bohemia, New York 11716

(iii) All Directors and current
executive officers
as a group (5 persons)........ 1,333,481(4)(5)(6)(7) 39.6

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

* Less than one percent.

(1) Except as set forth in the footnotes to this table and subject to
applicable community property law, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such Stockholder.

(2) Applicable percentage of ownership is based on 3,243,243 shares of Common
Stock outstanding on December 10, 1997, plus any presently exercisable
stock options or warrants held by each such holder and options or warrants
which will become exercisable within 60 days after such date.

(3) Includes 6,000 shares of Common Stock subject to options which are
exercisable at December 10, 1997 or which will become exercisable within 60
days of such date.

- 9 -

(4) Includes 59,700 shares of Common Stock owned by Jeffrey Leiderman, and
transferees of Mr. Leiderman, over which Mr. Dye exercises voting control.
For a description of this voting trust arrangement, see -- "Certain
Relationships and Related Transactions".

(5) Represents 75,000 shares of Common Stock subject to options which are
exercisable at December 10, 1997 or which will become exercisable within 60
days of such date.

(6) Includes 13,333 shares of Common Stock subject to options which are
exercisable at December 10, 1997 or which will become exercisable within 60
days of such date.

(7) Represents 20,000 shares of Common Stock subject to warrants or options
which are exercisable at December 10, 1997 or which will become exercisable
within 60 days of such date.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain transactions involving Messrs. Dye, Manser and Saad are reported in
"Executive Compensation -- Employment Contracts and Termination of Employment,
and Change-in-Control Arrangements."

In addition, the Company is indebted to Mr. Dye in an aggregate principal
amount of approximately $362,000, of which approximately $155,000 is payable on
demand and approximately $207,000 is due in November 1999. The loans bear
interest at 8% per annum.

Pursuant to a Voting Trust Agreement dated August 9, 1995, between Mr. Dye
and Jeffrey Leiderman, a holder of the Company's Common Stock, Mr. Dye has the
right to vote shares of Common Stock owned by Mr. Leiderman or any transferee of
Mr. Leiderman. The voting trust will expire in 2005 unless terminated sooner by
its terms.

Pursuant to a Separation Agreement between the Company and Stephen J.
McErlain dated as of July 15, 1996, if Mr. McErlain proposes to transfer all or
any part of his shares of Common Stock, the Company may elect to purchase all,
but not less than all, of the shares of Common Stock to be transferred by Mr.
McErlain for the price and upon the terms of the proposed transfer. If the
Company does not elect to purchase the shares of Common Stock proposed to be
transferred by Mr. McErlain, Mr. Dye may elect to purchase such shares of Common
Stock for the price and upon the terms of the proposed transfer.

- 10 -

PROPOSED AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN

GENERAL

The 1997 Plan was adopted by the Board of Directors on October 28, 1996 and
approved by the Stockholders of the Company on January 30, 1997. Those eligible
to receive stock option grants, stock purchase rights or stock appreciation
rights under the 1997 Plan include employees, non-employee directors and
consultants. The 1997 Plan was adopted to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, non-employee directors and consultants and to promote
the success of the Company's business. Currently, there are 300,000 shares of
Common Stock reserved for issuance upon the exercise of options and/or stock
purchase rights granted under the 1997 Plan.

The 1997 Plan is administered by the Option Committee, which is comprised
solely of outside directors. The Option Committee determines, among other
things, the nature of the options to be granted, the persons who are to receive
options (each a "Grantee"), the number of shares to be subject to each option
and the exercise price of the options. The 1997 Plan provides for the granting
of options intended to qualify as incentive stock options ("ISOs"), as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees of the Company as well as non-qualified stock options ("NQSOs") to
employees, non-employee Directors and consultants who perform services for the
Company or its subsidiaries. The exercise price of all ISOs granted under the
1997 Plan may not be less than the fair market value of the shares at the time
the option is granted. In addition, no ISO may be granted to an employee who
owns more than 10% of the total combined voting power of all classes of stock of
the Company unless the exercise price as to that employee is at least 110% of
the fair market value of the stock at the time of the grant. No employee may be
granted ISOs which are exercisable for the first time in any calendar year to
the extent that the aggregate fair market value of such option shares exceeds
$100,000 as of the date of grant. Options may be for a period of not more than
ten years from the date of grant, provided, however that the term of an ISO
granted to an employee who owns more that 10% of the total combined voting power
of all classes of stock of the Company may not exceed five years. The exercise
price of NQSOs granted under the 1997 Plan may not be less than 85% of the fair
market value per share of the Common Stock on the date of grant. No NQSO may be
granted to a person who owns more than 10% of the total combined voting power of
all classes of stock of the Company unless the exercise price to that person is
at least 110% of the fair market value of the stock at the time of the grant.
The exercise price must be paid in full at the time an option is exercised, and
at the Option Committee's discretion, all or part of the exercise price may be
paid with previously owned shares or other approved methods of payment. An
option is exercisable as determined by the Option Committee. The 1997 Plan will
terminate on October 28, 2006. Subject to the terms as specified in any option
agreement, if a Grantee's employment or consulting relationship terminates on
account of disability, the Grantee may exercise any outstanding option for one
year following the termination. If a Grantee dies while in the employ of the
Company or during the period of the consulting arrangement, the Grantee's estate
may exercise any outstanding option for one year following the Grantee's death.
If termination is for any other reason, the Grantee may exercise any outstanding
option for ninety days following such termination. Options are not assignable or
otherwise transferable except by will or the laws of descent and distribution
and shall be exercisable during the Grantee's lifetime only by the Grantee.

The 1997 Plan also permits the awarding of stock purchase rights at not
less than 50% of the fair market value of the shares as of the date offered. The
1997 Plan requires the execution of a restricted stock purchase agreement in a
form determined by the Option Committee. Once a stock purchase right is
exercised, the purchaser will have the rights of a Stockholder and will be a
Stockholder when the purchase is entered on the Company's records.

The 1997 Plan provides that, in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of or
reclassification of shares, or any other change in the corporate structure or

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shares of the Company, the Board of Directors shall make adjustments with
respect to the shares that may be issued under the 1997 Plan or that are covered
by outstanding options or stock appreciation rights, or in the option price per
share.

In the event of a dissolution or liquidation of the Company, the Board
shall notify the Grantee at least fifteen days prior to such proposed action. To
the extent not previously exercised, the outstanding options or stock
appreciation rights will terminate immediately prior to the consummation of such
proposed action. In the event of a merger or consolidation of the Company with
or into another corporation or the sale of all or substantially all of the
Company's assets (hereinafter, a "merger"), the outstanding options or stock
appreciation rights will be assumed or an equivalent option or stock
appreciation right will be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. In the event that such successor
corporation does not agree to assume the outstanding options or stock
appreciation rights or to substitute equivalent options or stock appreciation
rights, the Board of Directors will, in lieu of such assumption or substitution,
provide for the Grantee to have the right to exercise all of his outstanding
options or stock appreciation rights. If the Board of Directors makes an option
or stock appreciation right fully exercisable in lieu of assumption or
substitution in the event of a merger, the Board of Directors shall notify the
Grantee that the option or stock appreciation right will be fully exercisable
for a period of fifteen days from the date of such notice, and the option or
stock appreciation right will terminate upon the expiration of such period. The
option or stock appreciation right will be considered assumed if, following the
merger, the option or stock appreciation right confers the right to purchase,
for each share of Common Stock subject to the option or stock appreciation right
immediately prior to the merger, the consideration (whether stock, cash, or
other securities or property) received in the merger by holders of Common Stock
for each share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares). If such consideration received
in the merger was not solely common stock of the successor corporation or its
parent, the Board of Directors may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon the exercise of an option or stock appreciation right, for each share of
stock subject to the option or stock appreciation right, to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.

The Board may at any time amend, alter, suspend or discontinue the 1997
Plan, but no amendment, alteration, suspension or discontinuation will be made
which would impair the rights of any Grantee under any grant theretofore made,
without such Grantee's consent. In addition, to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act, or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of the National Association of Securities Dealers or an established
stock exchange), the Company shall obtain stockholder approval of any 1997 Plan
amendment in such a manner and to such a degree as required. Any such amendment
or termination of the 1997 Plan is not permitted to affect options or stock
appreciation rights already granted and such options or stock appreciation
rights will remain in full force and effect as if the 1997 Plan had not been
amended or terminated, unless mutually agreed otherwise between the Grantee and
the Board of Directors, which agreement must be in writing and signed by the
Grantee and the Company.

FEDERAL INCOME TAX ASPECTS

(A) ISOS

Some options to be issued under the 1997 Plan will be designated as ISOs
and are intended to qualify under Section 422 of the Code. Under the provisions
of that Section and the related regulations, an optionee will not be required to
recognize any income for federal income tax purposes at the time of grant of an
ISO, nor is the Company entitled to any deduction. The exercise of an ISO also
is not a

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taxable event, although the difference between the option price and the
fair market value on the date of exercise is an item of tax preference for
purposes of the alternative minimum tax. The taxation of gain or loss upon the
sale of stock acquired upon exercise of an ISO depends in part on whether the
stock is held for at least two years from the date the option was granted and at
least one year from the date the stock was transferred to the optionee (the "ISO
Holding Period").

If the ISO Holding Period is not met, then, upon disposition of such shares
(a "disqualifying disposition"), the optionee will realize compensation, taxable
as ordinary income in an amount equal to the excess of the fair market value of
the shares at the time of exercise over the option price, limited, however to
the gain on sale. Any additional gain would be taxable as capital gain (see
below). If the optionee disposes of the shares in a disqualifying disposition at
a price that is below the fair market value of the shares at the time the ISO
was exercised and such disposition is a sale or exchange to an unrelated party,
the amount includible as compensation income to the optionee will be limited to
the excess of the amount received on the sale or exchange over the exercise
price.

If the ISO Holding Period is met, the treatment of the gain upon the sale
of the shares depends on the date the shares were sold and the period such
shares were held by the optionee. With respect to sales on or before May 6,
1997, such gain is taxable as long-term capital gain at a maximum rate of 28%.
With respect to sales after May 6, 1997 and on or before July 28, 1997, such
gain is taxable as long-term capital gain but at a maximum rate of 20%.

With respect to sales after July 28, 1997, if the shares were held at least
18 months as of the sale date, the gain is taxable as a long-term capital gain
at a maximum rate of 20%. If, however, the sale occurs on or after July 28, 1997
and the shares were held at least one year (so as to satisfy the ISO Holding
Period) but less than 18 months, the gain is taxable as a "mid-term gain" at a
maximum rate of 28%.

A maximum capital gains rate of 18% will apply to certain sales after
December 31, 2000 of shares acquired upon the exercise of an ISO if such shares
have been held for at least five years.

If the ISO is exercised by delivery of previously owned shares of Common
Stock in partial or full payment of the option price, no gain or loss will
ordinarily be recognized by the optionee on the transfer of such previously
owned shares. However, if the previously owned transferred shares were acquired
through the exercise of an ISO, the optionee may realize ordinary income with
respect to the shares used to exercise an ISO if such transferred shares have
not been held for the ISO Holding Period. If the optionee recognizes ordinary
income upon a disqualifying disposition, the Company generally will be entitled
to a tax deduction in the same amount. If an ISO is exercised through the
payment of the exercise price by the delivery of Common Stock, to the extent
that the number of shares received exceeds the number of shares surrendered,
such excess shares will possibly be considered ISO stock with a zero basis.

(B) NQSOS

Some options to be issued under the 1997 Plan will be designated as NQSOs.
Under the relevant provisions of the Code, if an option is granted to an
employee, director or consultant in connection with the performance of services
and the option itself has a "readily ascertainable fair market value" at the
time of the grant, the employee, director or consultant will be deemed to have
received compensation income in the year of grant in an amount equal to the
excess of the fair market value of the option at the time of grant over the
amount, if any, paid by the optionee for the option. However, a NQSO generally
has "readily ascertainable fair market value" only when the option is actively
traded on an established market and/or when certain requirements are met.

If (as in the case of NQSOs granted under the 1997 Plan at this time) the
NQSO does not have a readily ascertainable fair market value at the time of the
grant, the NQSO is not included as

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compensation income at the time of grant. Rather, the optionee realizes
compensation income only when the NQSO is exercised and the optionee has become
substantially vested in the shares transferred. The shares are considered to be
substantially vested when they are either transferable or not subject to a
substantial risk of forfeiture. The amount of income realized is equal to the
excess of the fair market value of the shares at the time the shares become
substantially vested over the sum of the exercise price plus the amount, if any,
paid by the optionee for the NQSO.

If a NQSO is exercised through payment of the exercise price by the
delivery of Common Stock, to the extent that the number of shares received by
the optionee exceeds the number of shares surrendered, ordinary income will be
realized by the optionee at that time only in the amount of the fair market
value of such excess shares, and the tax basis of such excess shares will be
such fair market value.

Generally, the optionee's basis in the shares will be the exercise price
plus the compensation income realized at the time of grant or exercise,
whichever is applicable, and the amount, if any, paid by the optionee for the
NQSO. In the compensatory option context, the optionee's basis in the shares
will generally be equal to the exercise price of the option plus the amount of
compensation income realized by the optionee plus the amount, if any, paid by
the optionee for the option. The capital gain or loss will be short-term if the
shares are disposed of within one year after the option is exercised; and such
short-term gains are taxable as ordinary income. If the shares are disposed of
more than one year after the option is exercised and such disposition took place
on or before May 6, 1997, any gain or loss will be long-term; such gains are
subject to a maximum tax rate of 28%. If such disposition occurred after May 6,
1997 and on or before July 28, 1997, any long-term gains are subject to a
maximum tax rate of 20%.

With respect to sales after July 28, 1997, if the shares were held at least
18 months as of the sale date, the gain is taxable as a long-term capital gain
at a maximum rate of 20%. If, however, the sale occurs on or after July 28, 1997
and the shares were held at least one year but less than 18 months, the gain is
taxable as a "mid-term gain" at a maximum rate of 28%.

A maximum capital gains rate of 18% will apply to certain sales, after
December 31, 2000, of shares acquired upon the exercise of an NQSO if such
shares have been held for at least five years.

If a NQSO is taxed at the time of grant and expires or lapses without being
exercised, it is treated in the same manner as the lapse of an investment
option. The lapse is deemed to be a sale or exchange of the NQSO on the day the
NQSO expires and the amount of income realized is zero. The optionee recognizes
a capital loss in the amount of the optionee's basis (compensation income
realized at the time of the grant plus the amount, if any, paid by the optionee
for the option) in the NQSO at the time of the lapse. The loss is short-term or
long-term, depending on the optionee's holding period in the NQSO and the
effective date of such lapse.

If a NQSO is not taxed at the time of grant and expires without being
exercised, the optionee will have no tax consequences unless the optionee paid
for the NQSO. In such case, the optionee would recognize a loss in the amount of
the price paid by the optionee for the NQSO.

The Company is generally entitled to a deductible compensation expense in
an amount equivalent to the amount included as compensation income to the
optionee. This deduction is allowed in the Company's taxable year in which the
income is included as compensation to the optionee.

The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the relevant sections of the Code, their legislative
histories and the income tax regulations which interpret similar provisions of
the Code. Furthermore, the forgoing is only a general discussion of the federal
income tax aspects of the 1997 Plan and does not purport to be a complete
description of all federal income tax aspects of the 1997 Plan. Optionees may
also be subject to state and local taxes in connection with the grant or
exercise of

- 14 -

options or stock appreciation rights granted under the 1997 Plan and the sale or
other disposition of shares acquired upon exercise of the options or stock
appreciation rights. Each employee receiving a grant of options or stock
appreciation rights should consult with his or her personal tax advisor
regarding the federal, state and local tax consequences of participating in the
1997 Plan.

PREVIOUSLY GRANTED OPTIONS UNDER THE 1997 PLAN

As of December 10, 1997, the Company had granted options to purchase an
aggregate of 243,600 shares of Common Stock under the 1997 Plan at exercise
prices ranging from $5.375 to $7.00 per share to 145 of its employees. The
weighted average exercise price of such options is $6.63. As of December 10,
1997, approximately 87,867 options to purchase shares were vested and no options
to purchase shares had been exercised under the 1997 Plan. In addition, as of
December 10, 1997, no such options were granted to (i) the Named Executives;
(ii) any nominee for election as a Director; (iii) any current Director who is
not an executive officer; (iv) any associate of any Director, executive officer
or nominee; or (v) any person who has received or is to receive 5% of such
options or rights.

As of December 10, 1997, the market value of the Common Stock underlying
the 1997 Plan was $7.00 per share.

PROPOSED AMENDMENT

Stockholders are being asked to consider and vote upon a proposed amendment
(the "Amendment") to the 1997 Plan to increase the maximum number of shares of
Common Stock available for issuance under the 1997 Plan from 300,000 to 500,000
shares and to reserve an additional 200,000 shares of Common Stock of the
Company for issuance upon the exercise of stock options granted under the 1997
Plan.

The Board of Directors believes that the Amendment provides an important
inducement to recruit and retain the best available personnel. The Board of
Directors believes that providing employees, non-employee directors and
consultants with an opportunity to invest in the Company rewards them
appropriately for their efforts on behalf of the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.

RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors of the Company has, subject to Stockholder approval,
retained Ernst & Young LLP as independent certified public accountants of the
Company for the year ending August 31, 1998. Ernst & Young LLP also served as
independent certified public accountants of the Company for fiscal 1997. Neither
the accounting firm nor any of its members has any direct or indirect financial
interest in or any connection with the Company in any capacity other than as
independent certified public accountants.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE YEAR ENDING AUGUST 31, 1998.

One or more representatives of Ernst & Young LLP is expected to attend the
Meeting and to have an opportunity to make a statement and/or respond to
appropriate questions from Stockholders.

- 15 -

On August 28, 1996, the Company selected Ernst & Young LLP to act as
independent accountants for the Company and informed the prior auditors,
Cornick, Garber & Sandler, LLP, the Company's independent accountants since
October 1995, of its decision. In connection with its audits for each of the two
years in the period ended August 31, 1995 and thereafter, there were no
disagreements with the prior auditors on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures. The
prior auditors' report on the Company's financial statements for each of the two
years in the period ended August 31, 1995 contained no adverse opinion or
disclaimer of opinion and was not modified or qualified as to uncertainty, audit
scope, or accounting principles. The decision to change accountants was approved
by the Board of Directors of the Company. The prior auditors have furnished the
Company with a letter addressed to the SEC stating their agreement with the
above statements. Such letter appeared as Exhibit 16 to the Company's Current
Report on Form 8-K filed with the SEC on September 4, 1996. Prior to retaining
Ernst & Young LLP, the Company had not consulted with Ernst & Young LLP
regarding accounting principles or the type of opinion that would be rendered on
the Company's financial statements.

STOCKHOLDERS' PROPOSALS

Stockholders who wish to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 1999 Annual Meeting of
Stockholders must advise the Assistant Secretary of the Company of such
proposals in writing by August 25, 1998.

OTHER MATTERS

The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.

GENERAL

The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.

In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by Directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company will also request that brokers, nominees, custodians and other
fiduciaries forward soliciting materials to the beneficial owners of shares held
of record by such brokers, nominees, custodians and other fiduciaries. The
Company will reimburse such persons for their reasonable expenses in connection
therewith.

Certain information contained in this Proxy Statement relating to the
occupations and security holdings of Directors and officers of the Company is
based upon information received from the individual Directors and officers.

UNIDIGITAL INC. WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS REPORT ON FORM
10-KSB FOR THE FISCAL YEAR ENDED AUGUST 31, 1997, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS STOCKHOLDERS OF
RECORD ON DECEMBER 10, 1997, AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE
UPON WRITTEN REQUEST MADE TO PETER SAAD, ASSISTANT SECRETARY, UNIDIGITAL INC.,
545 WEST 45TH STREET, NEW YORK, NEW YORK 10036. A REASONABLE FEE WILL BE CHARGED
FOR COPIES OF REQUESTED EXHIBITS.

- 16 -

PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.

By Order of the Board of Directors

/s/ Peter Saad
Peter Saad
Assistant Secretary

New York, New York
December 23, 1997

- 17 -

UNIDIGITAL INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS

The undersigned hereby constitutes and appoints William E. Dye his or her
true and lawful agent and proxy with full power of substitution to represent and
to vote on behalf of the undersigned all of the shares of Common Stock of
Unidigital Inc. (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the offices of the
Company, 545 West 45th Street, New York, New York at 9:30 A.M., local time, on
Thursday, January 29, 1998 and at any adjournment or adjournments thereof, upon
the following proposals more fully described in the Notice of Annual Meeting of
Stockholders and Proxy Statement for the Meeting (receipt of which is hereby
acknowledged).

This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR proposals 1, 2 and 3.

1. ELECTION OF DIRECTORS.
Nominees: William E. Dye, Anthony Manser, Peter Saad, Harvey Silverman and
David Wachsman.

(Mark one only)
VOTE FOR all the nominees listed above; except vote withheld from the following
nominees (if any). | |

- ------------------------------------------------------------------
VOTE WITHHELD from all nominees. | |

2. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1997 EQUITY INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON THE
EXERCISE OF OPTIONS GRANTED UNDER SUCH PLAN FROM 300,000 TO 500,000 SHARES.

3. APPROVAL OF PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE YEAR ENDING
AUGUST 31, 1998.

(continued and to be signed on reverse side)

4. In his discretion, the proxy is authorized to vote upon other matters as
may properly come before the Meeting.

Dated:
---------------------------------- THIS PROXY MUST BE SIGNED
EXACTLY AS THE NAME APPEARS
- ---------------------------------------- HEREON. WHEN SHARES ARE HELD
Signature Of Stockholder BY JOINT TENANTS, BOTH SHOULD
SIGN. IF THE SIGNER IS A
- ---------------------------------------- CORPORATION, PLEASE SIGN FULL
Signature Of Stockholder if held jointly CORPORATE NAME BY DULY
AUTHORIZED OFFICER, GIVING FULL
TITLE AS SUCH. IF A
| |I WILL | |WILL NOT attend the PARTNERSHIP, PLEASE SIGN IN
Meeting. PARTNERSHIP NAME BY AUTHORIZED
PERSON.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.

- 2 -