<PAGE>

                                                                   EXHIBIT 10.49

                                    PSC INC.
                               PSC SCANNING, INC.
                                 675 Basket Road
                             Webster, New York 14580

                                                         As of December 29, 2000

JOHN HANCOCK LIFE INSURANCE COMPANY
(formerly John Hancock Mutual Life Insurance Company)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
200 Clarendon Street
Boston, Massachusetts  02117

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
LINCOLN NATIONAL INCOME FUND, INC.
c/o Lincoln Investment Management, Inc.
200 East Berry Street
Renaissance Square
Ft. Wayne, Indiana  46802

SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South
Suite 800
Minneapolis, Minnesota  55401

THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
c/o Alliance Capital Management L.P.
1345 Avenue of the Americas, 37th Floor
New York, New York  10105

Re:  Amended and Restated Amendment No. 7 and Consent and Waiver Under
Securities Purchase Agreements ("Amended and Restated Amendment No. 7")

Ladies and Gentlemen:

  PSC INC., a New York corporation (the "Holding Company"), and PSC SCANNING,
INC.,  a  Delaware  corporation   (formerly  named  SpectraScan,   Inc.)  and  a
Wholly-Owned  Subsidiary of the Holding Company (the  "Operating  Company") (the
Holding Company and the Operating Company are sometimes collectively referred to
herein as the "Companies" and each as a "Company"),  jointly and severally agree
with you as follows:
<PAGE>

1. Definitions; Background.


     (a) Reference is hereby made to those certain Securities Purchase
Agreements dated July 12, 1996, as amended, modified and supplemented by (i)
Amendment No. 1 to Securities Purchase Agreements dated October 10, 1996, (ii)
Amendment No. 2 and Waivers Under Securities Purchase Agreements dated as of
July 4, 1997, (iii) Amendment No. 3 to Securities Purchase Agreements and
Warrants dated August 18, 1997, (iv) Consent and Waiver Under Securities
Purchase Agreements and Warrants dated December 29, 1997, (v) Amendment No. 4,
Consent and Waiver Under Securities Purchase Agreements dated March 1, 1999,
(vi) Amendment No. 5 and Consent Under Securities Purchase Agreements dated
December 20, 1999, (vii) Consent Under Securities Purchase Agreements dated
January 19, 2000, (viii) Amendment No. 6 and Consent and Waiver Under Securities
Purchase Agreements dated as of March 31, 2000, and (ix) Waiver Under Securities
Purchase Agreements dated as of November __, 2000, (as the same may be amended,
modified or supplemented from time to time, the "Securities Purchase
Agreements"), among the Holding Company, the Operating Company and each of you.

     (b) The Companies have requested that the holders of the Notes amend and
restate Amendment No. 7 and Consent and Waiver Under Securities Purchase
Agreements in its entirety as set forth in this Amended and Restated Amendment
No. 7 and such holders by their execution hereof agree to the same. Amendment
No. 7 and Consent and Waiver Under Securities Purchase Agreements became
effective on December 29, 2000.

     (c) Capitalized terms used herein without definition have the meanings
ascribed to them in the Securities Purchase Agreements.

2. Waivers; Amendments; Acknowledgment.

     (a) Waiver of Past Defaults. The Companies have requested that the holders
of the Notes waive the Events of Default arising on account of the Companies'
failure to be in compliance as of September 30, 2000 with the financial
covenants set forth in section 14.7(a) (Fixed Charge Coverage Ratio), section
14.7(b) (Adjusted Consolidated Indebtedness Ratio), section 14.7(c) (Senior Debt
to Adjusted EBITDA Ratio) and section 14.7(d) (Net Worth) (the "Financial
Covenants"). On the basis of the information provided to the holders of the
Notes by the Companies in connection herewith, and subject to the terms and
conditions hereof, such holders by their execution hereof agree to the same.

     (b) Amendments to Financial Covenants for December 31, 2000. The Companies
have requested that the holders of the Notes waive the requirement that the
Companies be in compliance as of December 31, 2000 with the Financial Covenants.
On the basis of the information provided to the holders of the Notes by the
Companies in connection herewith, and subject to the terms and conditions
hereof, such holders by their execution hereof agree to the same, provided that
the Companies remain, and the Companies do hereby agree to remain, at all times
in compliance with the terms of Amended and Restated Amendment Ten to Bank
Agreement (as defined below), including, without limitation, the financial
covenants set forth therein, as the same may be supplemented from time to time.
A true, correct and complete copy of Amended and Restated Amendment Ten to Bank
Agreement is attached hereto as Exhibit 2(b).
<PAGE>

     (c) Acknowledgment as to Superior Indebtedness. The holders of the Notes
hereby acknowledge that obligations of the Companies incurred in connection with
the F/X Facility established under (and as defined in) Amended and Restated
Amendment Ten to Bank Agreement are Superior Indebtedness under (and as defined
in) section 10 of the Securities Purchase Agreements subject to the limitations
set forth in such section 10, including those set forth in the definition of the
term "Superior Indebtedness".

     3. Amendment to the Notes to Defer Certain Interest Payments. Each of the
Notes is hereby amended to provide that all interest accrued on the Notes from
and after September 30, 2000 to April 1, 2001 shall be paid on April 1, 2001
(and no payments of interest on the Notes shall be due on December 31, 2000 and
March 31, 2001), and thereafter payments of interest due on the Notes shall be
payable on each March 31, June 30, September 30 and December 31, commencing June
30, 2001. Upon the request of any holder of Notes, the Operating Company shall
deliver to such holder new Notes in exchange for those held by such holder to
reflect the foregoing. Exhibit 1(a)(i) to the Securities Purchase Agreements is
hereby amended to be in the form of Exhibit 3 attached hereto.

     4. Conditions Precedent to Effectiveness. The provisions of this Letter
Agreement shall be effective as of the date first specified above at such time
as each of the following conditions shall have been fulfilled:

     (a) The Companies shall have paid in immediately available funds an advance
to the holders of the Notes (for the professional fees of the holders of the
Notes which the Companies are obligated to pay under section 21 of the
Securities Purchase Agreements) in an aggregate amount equal to $100,000 (the
"Advance"), which amount shall be paid to the clients' funds account of Choate,
Hall & Stewart, special counsel to the holders of the Notes, in accordance with
the following instructions:

  Bank:                     Citizens Bank of Massachusetts
  ABA#:                     0115-0012-0
  For Credit To:            Choate, Hall & Stewart Account #110781-249-3
  Reference:                2003532-0002 (C. Glerum/B. Lee).
<PAGE>

The parties hereto agree that upon payment in cash in full of the Advance (which
amount is not refundable under any circumstance), the Companies shall no longer
be obligated under section 21 of the Securities Purchase Agreements to reimburse
the holders of the Notes for professional fees incurred prior to April 1, 2001
in connection with the restructuring of the credit facility established pursuant
to the Securities Purchase Agreements, but in no other respect are any of the
terms or provisions of section 21 of the Securities Purchase Agreements modified
hereby. The holders of the Notes acknowledge receipt of the Advance prior to the
execution of this Amended and Restated Amendment No. 7.

     (b) The Companies shall have delivered an executed copy of the Amended and
Restated Tenth Amendment and Waiver dated as of December 29, 2000 (the "Amended
and Restated Amendment Ten to Bank Agreement"), among the Holding Company, the
Operating Company, the financial institutions party thereto, Fleet National Bank
(formerly known as Fleet Bank), as Initial Issuing Bank, and Fleet National
Bank, as administrative agent, which must be in form and substance satisfactory
to you.

     5. Additional Reports, etc. The Companies hereby agree to furnish to you
the same reports and information as they furnish to the Banks and at the same
time, including, without limitation, all of the same prepared by Policano &
Manzo and Raymond James & Associates and all of the same required by the terms
of the Amended and Restated Amendment Ten to Bank Agreement. The Companies do
further agree to afford to the holders of the Notes and their counsel and other
professional representatives the same access to the properties, assets, books,
records, employees and agents of the Companies and their Subsidiaries and the
same cooperation as is afforded to the Banks, pursuant to the terms of Amended
and Restated Amendment Ten to Bank Agreement or otherwise.

6. Consents.

     (a) The holders of the Notes hereby irrevocably and unconditionally consent
to the sale of (i) the Holding Company's Webster, New York facility, (ii) the
Holding Company's Imaging Product and Verification Product businesses, and (iii)
the Holding Company's Automation Business (collectively, the "Non-Core Asset
Sales"), provided that the Net Cash Proceeds of such sales are applied in the
manner set forth in section 5.1(q) of Amended and Restated Amendment Ten to Bank
Agreement, as in effect upon execution thereof and without giving effect to any
modification therof.

     (b) The holders of the Notes acknowledge that section 14.16(c) of the
Securities Purchase Agreements permits the amendment of the Bank Credit
Agreement as provided for in Amended and Restated Amendment Ten to Bank
Agreement.

7. Ratification, etc.

     (a) The Companies represent and warrant that, after giving effect to the
provisions of this Letter Agreement, no Default or Event of Default exists.
<PAGE>

     (b) The Companies each ratify and confirm the Securities Purchase
Agreements and each of the other Operative Documents to which each is a party
and agree that each such agreement, document and instrument is in full force and
effect, that its obligations thereunder and under this Letter Agreement are its
legal, valid and binding obligations enforceable against it in accordance with
the terms thereof and hereof and that it has no defense, whether legal or
equitable, setoff or counterclaim to the payment and performance of such
obligations.

     (c) The Companies agree that (i) if any default shall be made in the
performance or observance of any covenant, agreement or condition contained in
this Letter Agreement or in any agreement, document or instrument executed in
connection herewith or pursuant hereto or (ii) if any representation or warranty
made by the Companies herein or therein shall prove to have been false or
incorrect on the date as of which made, the same shall constitute an immediate
Event of Default under the Securities Purchase Agreements and the other
Operative Documents and, in such event, you and each other holder of any of the
Notes shall have all rights and remedies provided by law and/or provided or
referred to in the Securities Purchase Agreements and the other Operative
Documents. The Companies further agree that this Letter Agreement is an
Operative Document and all references thereto in the Securities Purchase
Agreements and in any other of the other Operative Documents shall include this
Letter Agreement.

     8. Payment of Special Waiver Fee. The Companies shall pay to the holders of
the Notes in cash on April 1, 2001 a non-refundable special waiver fee in the
aggregate amount of $75,000, which amount shall be shared among the holders of
the Notes in proportion to the respective aggregate principal amount of the
Notes held by each holder.

     9. Governing Law. This Letter Agreement, including the validity hereof and
the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the domestic substantive laws of the State of
New York without giving effect to any choice of law or conflicts of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction.

     10. Miscellaneous. The headings in this Letter Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Letter Agreement embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any provision in this Letter Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. This Letter Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts but all such
counterparts shall together constitute but one and the same instrument.

                         [The remainder of this page is
                           intentionally left blank.]
<PAGE>

     If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart hereof, whereupon this Letter
Agreement shall become a binding agreement under seal among the parties hereto.
Please then return one of such counterparts to the Companies.

                           Very truly yours,

                           PSC INC.



                            By: __________________________________
                                           (Title)


                            PSC SCANNING, INC.



                            By: __________________________________
                                          (Title)


Each of the  undersigned  (a)  acknowledges  and  assents  to the terms and
provisions of the foregoing  Letter Agreement and (b) ratifies and confirms each
of the  Operative  Documents  to which it is a party and  agrees  that each such
Operative Document is in full force and effect, that its obligations  thereunder
are  its  legal,  valid  and  binding  obligations  enforceable  against  it  in
accordance  with the terms thereof and that it has no defense,  whether legal or
equitable,  setoff or  counterclaim,  to the  payment  and  performance  of such
obligations.

                              INSTAREAD CORPORATION


                            By: __________________________________
                                            (Title)


                            PSC AUTOMATION, INC. (formerly
                             named Lazerdata Corporation)


                            By: __________________________________
                                            (Title)


<PAGE>

                           PERCON INCORPORATED

                           By: __________________________________
                                                          (Title)


            [The remainder of this page is intentionally left blank.]
<PAGE>

The foregoing is hereby accepted and agreed to:

JOHN HANCOCK LIFE INSURANCE COMPANY
(formerly John Hancock Mutual Life Insurance Company)

By:  _____________________________
            (Title)
<PAGE>

The foregoing is hereby accepted and agreed to:

JOHN HANCOCK VARIABLE LIFE
 INSURANCE COMPANY


By:  _______________________________
            (Title)
<PAGE>

The foregoing is hereby accepted and agreed to:

THE LINCOLN NATIONAL LIFE
 INSURANCE COMPANY

By: Lincoln Investment Management, Inc.
    Its Attorney-in-Fact


   By:  ___________________________
               (Title)
<PAGE>

The foregoing is hereby accepted and agreed to:

LINCOLN NATIONAL INCOME FUND, INC.


By:  _______________________________
                             (Title)
<PAGE>

The foregoing is hereby accepted and agreed to:

SECURITY-CONNECTICUT LIFE
 INSURANCE COMPANY


By:  _______________________________
                             (Title)
<PAGE>

The foregoing is hereby accepted and agreed to:

THE EQUITABLE LIFE ASSURANCE
 SOCIETY OF THE UNITED STATES


By:  _______________________________
                             (Title)
<PAGE>

                                                                    Exhibit 2(b)

      Amended and Restated Amendment Ten to Bank Agreement
<PAGE>

                                                                       Exhibit 3

                                  Form of Note