UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 41042 / February 11, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9827 : : ORDER INSTITUTING CEASE- In the Matter of : AND-DESIST PROCEEDINGS : PURSUANT TO SECTION 21C OF Stephen J. McErlain, : THE SECURITIES EXCHANGE ACT : OF 1934 AND FINDINGS AND Respondent. : ORDER OF THE COMMISSION : I. The Commission deems it appropriate and in the public interest that public administrative proceedings be, and they hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether Stephen J. McErlain ("McErlain") violated (or caused violations of) Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder. II. In anticipation of the institution of these administrative proceedings, McErlain ("the Respondent") has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, the Respondent, without admitting or denying the matters set forth herein, consents to the issuance of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Findings and Order of the Commission ("the Order"), and to the entry of the findings, and imposition of the remedial sanctions set forth below. III. On the basis of this Order and the Respondent's Offer of Settlement ("Offer"), the Commission finds the following: A. FACTS 1. Respondent Stephen J. McErlain, age 34, was a Vice President of Unidigital, Inc. ("Unidigital") from its inception until June 1, 1996, and served as a director of Unidigital until July 15, 1996. McErlain is and has been at all relevant times a beneficial owner of more than ten percent of the equity securities of Unidigital. 2. ISSUER Unidigital, Inc., a Delaware corporation with principal offices in New York, is a service business in the graphic arts industry. According to Unidigital’s Annual Report on Form 10-KSB for the year ended August 31, 1998, Unidigital had total assets of over $67.3 million and shareholders’ equity of over $14.3 million as of August 31, 1998. Unidigital had 5,089,858 shares of common stock outstanding as of October 31, 1998. Unidigital reported net income of approximately $1.1 million, or $.32 per common share, for its 1998 fiscal year. Unidigital’s common stock has been registered with the Commission pursuant to Section 12 of the Exchange Act since February 1, 1996, and is listed on the NASDAQ National Market System ("NASDAQ"). B. APPLICABLE LAW Section 16(a) of the Exchange Act requires that beneficial owners of more than ten percent of any class of any equity security registered pursuant to Section 12 of the Exchange Act and the officers and directors of the issuer of any such security (hereinafter "insider") file a statement with the Commission by the effective date of a registration statement filed pursuant to Section 12 of the Exchange Act, or within ten days of becoming such officer, director or beneficial owner, reporting the amount of all equity securities of such issuer of which they are a beneficial owner. Section 16(a) also requires an insider to file with the Commission within ten days after the close of each calendar month, if there has been a change in the insider's ownership of the issuer's equity securities during such month, a statement indicating such changes. The rules enacted pursuant to Section 16(a) provide that an initial statement by an insider is to be made on a Form 3 and subsequent statements of changes in beneficial ownership are to be made on a Form 4 or a Form 5. C. MCERLAIN'S VIOLATIONS OF SECTIONS 16(a) OF THE EXCHANGE ACT AND THE RULES THEREUNDER As shown in the attached Table, in connection with changes in his ownership of Unidigital securities, McErlain failed to timely file five Forms 4 and one Form 5, resulting in delinquencies ranging from two weeks to more than one year and two months. The total value of the transactions in Unidigital stock for which McErlain filed late Forms 4 is approximately $587,730. McErlain's history of delinquency, compiled from the ownership reports he has filed with the Commission for Unidigital, is set forth below: STEPHEN J. MCERLAIN Forms 3, 4 and 5 For Holdings and Transactions in the Equity Securities of UNIDIGITAL, INC. February 1, 1996 through December 24, 1998 Date Month Price Due/ Apprx. of No. of Per Total Date Yrs/Mos/ Trans. Type Shares Share* $Value Rec'd Wks.Late Form 3 02-96 776,852 02-01-96 T 02-02-96 Forms 4, 5 03-96 Buy 2,000 5.00 10,000 04-10-96 T 04-10-96 07-96 Other 6,000 6.75 40,500 08-12-96 T Acq 08-12-96 04-97 Sale 31,892 5.25 167,433 05-12-97 7m 12-12-97 07-97 Sale 32,430 6.00 194,580 08-11-97 4m 12-12-97 FY-97 Form 5 10-15-97 1y2m1w 12-24-98 11-97 Sale 5,000 8.00 40,000 12-10-97 1m2w 1,000 8.13 8,130 01-27-98 48,130 12-97 Sale 16,430 6.88 113,038 01-12-98 2w 01-27-98 03-98 Sale 10,000 5.63 56,300 04-10-98 T 500 9.13 4,565 04-10-98 03-98 Sale 7,070 9.13 64,549 04-10-98 3m 07-10-98 Date Month Price Due/ Apprx. of No. of Per Total Date Yrs/Mos/ Trans. Type Shares Share* $Value Rec'd Wks.Late 04-98 Sale 4,400 9.25 40,700 05-11-98 T 5,000 9.50 47,500 05-11-98 05-98 Sale 4,600 8.00 36,800 06-10-98 T 4,000 8.75 35,000 06-10-98 06-98 Sale 1,000 8.63 8,630 07-10-98 T 1,000 8.38 8,380 07-10-98 11-98 Sale 10,000 4.50 45,000 12-10-98 T 12-10-98 Total value late reported transactions: $ 587,730 * = Price per share rounded off T = Timely Acq = Acquisition IV. FINDINGS Based on the above, the Commission finds that McErlain violated Section 16(a) of the Exchange Act, and Rules 16a-2 and 16a-3 promulgated thereunder. V. OFFER OF SETTLEMENT McErlain has submitted an Offer of Settlement in this proceeding which the Commission has determined to accept. McErlain, in his Offer, consents to this Order making findings, as set forth above, and ordering him to cease and desist from committing or causing any violations of, and committing or causing any future violations of, Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder. VI. ORDER Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that McErlain cease and desist from committing or causing any violations of, and committing or causing any future violations of, Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder. By the Commission. Jonathan G. Katz Secretary