AGREEMENT dated July 12, 1996 between PSC Inc. ("PSC") and John F. O'Brien 
("O'Brien").

                                    RECITALS

     A. O'Brien has been the President of Spectra-Physics Scanning systems, Inc.
("SPSS").

     B. By letter  dated  March 31,  1996,  a copy of which is  attached to this
Agreement as Exhibit A (the  "Severance  Letter"),  SPSS  provided  O'Brien with
certain severance benefits under certain conditions as therein described.

     C. Effective this date, SPSS has become a wholly-owned subsidiary of PSC.

     D. PSC and  O'Brien  desire that  effective  this date  O'Brien  become the
President of PSC.

     E.  O'Brien  seeks t protect his rights under the  Severance  Letter in the
event  that  the job  content  of  position  of  President  does  not  meet  his
expectations during a six month transitional period.

     Accordingly, it is agreed as follows:

1. Upon the execution hereof O'Brien will be employed as President of PSC having
the responsibilities and reporting  relationships  substantially as described in
Alternative  #3 of a  memorandum  dated July 9, 1996 from  O'Brien to L. Michael
Hone, a copy of which is attached as Exhibit B.

2. The term of this  employment  shall expire on six months from the date hereof
(the "Term") unless the parties shall mutually agree in writing to renew, extend
or modify  the same.  O'Brien's  employment  hereunder  shall not be  terminated
during  the said six month  term  except for Cause as the same is defined in the
Severance Letter.

3. During the Term O'Brien's salary and benefits shall be continued as currently
in effect  subject,  in the case of benefits,  to such changes as PSC's  benefit
plans effect with regard to all executive employees generally.

4. O'Brien's  right to severance  payments as set forth in the Severance  Letter
shall not be abridged if he shall  resign his  position  (i) during the Term for
"Good  Reason" as  defined  in the  Severance  Letter,  or (ii)  during the Term
because  his duties  and  responsibilities  are  changed  materially  from those
described under the  Alternatives  1,2 and 3 of Exhibit B. O'Brien will give PSC
15 days written notice of any intent to terminate his employment during the Term
and PSC will have an  opportunity  to cure or remedy the  situation  during such
period. In addition,  he shall be entitled to the said severance benefits, if at
the  expiration  of the Term in his sole  discretion  he elects  not to renew or
extend  his  employment  with  PSC  because  the  job  content  has  not met his
expectations.  In such  case  for the  purpose  of  calculating  the  amount  of
O'Brien's  severance  payments,  the term  Closing Date as used at the bottom of
page one and on page two of the  Severance  Letter shall be deemed to be January
12, 1997.


<PAGE>



5. O'Brien  agrees that during the Term and for five years  thereafter,  he will
not,  except as required by the  performance of his duties under this Agreement,
disclose  or  authorize  anyone else to disclose or use or make known for his or
another's  benefit,  any  confidential  information or knowledge of data of PSC,
whether or not patentable or copyrightable,  in any way acquired by him from the
inception of his employment  with PSC through the expiration of the Term (herein
"Confidential  Information").  Confidential  Information,  the  purposes of this
Agreement,  shall include,  but not be limited to, matters not readily available
to the public which are:

     a. of a technical nature,  such as, but not limited to, methods,  know-how,
formulae, compositions, drawings, blueprints, compounds, processes, discoveries,
machines, prototypes, inventions, computer programs;

     b. of a business  nature,  such as, but not limited to,  information  about
sales  or lists of  customers,  prices,  costs,  purchasing,  profits,  markets,
strengths and weaknesses of products, business processes, business and marketing
plans and  activities  and  employee  personnel  records;  

     c. pertain to future  developments,  such as, but not limited,  to research
and development, future marketing or merchandising plans or ideas.

         Immediately upon termination of O'Brien  services,  he shall deliver to
PSC all  originals  and  copies of  everything  in his  possession  or under his
control  which  embodies or contains any  Confidential  Information,  including,
without limitations, all documents, correspondence,  specifications, blueprints,
notebooks,  reports,  sketches,  formulae,  computer  programs,  computer discs,
prototypes,  price lists, customer lists or information,  samples, and all other
materials.

         Confidential  Information  shall not include  information  which (i) is
published or otherwise becomes generally available to the public other than by a
breach  of  confidentiality,  or (ii)  O'Brien  can  show by  documentation  was
properly  in his  possession  to his  employment  with  PSC,  or  (iii)  becomes
available to O'Brien from an independent source without breach of this Agreement
or violation of law, or (iv) id  independently  developed by O'Brien without the
use of PSC's Confidential Information.

         6.a.  In light of the special  and unique  services  that have been and
will be furnished to PSC by O'Brien and the  Confidential  Information  that has
been and will be disclosed  to him during his  employment,  O'Brien  agrees that
during  the  Term,  and for a period of twelve  months  thereafter  he will not,
without  the  written  consent  of  PSC,  directly  or  indirectly,  whether  as
principal, agent, officer, director, consultant,  employee, partner, stockholder
or owners of or in any capacity  with any  corporation,  partnership,  business,
firm,  individual company or any entity located anywhere in the world engage in,
or assist another to engage in, any work or activity in any way competitive with
the Business of PSC as herein  defined.  However,  nothing  herein shall prevent
O'Brien from owning not more than five percent (5%) of the outstanding  publicly
traded shares of common stock of a corporation,  as to which corporation O'Brien
has no relationship other than as a shareholder.

         O'Brien  specifically  agrees that because of his special expertise and
the special and unique  services that he will be furnishing  PSC, and because of
the  Confidential   Information  that  will  be  disclosed  to  him  during  his
employment,  the above stated  geographic  areas and time period,  in and during
which he will not compete with PSC, are reasonable in scope and duration and are
necessary to afford PSC just and  adequate  protection  against the  irreparable
damage which would result to PSC from any activities prohibited by this Section.
The  "Business"  of PSC is  the  development,  manufacturing  and  marketing  of
technologies products and services for the automatic  identification and keyless
data entry industry,  and includes,  but is not limited to, products,  services,
applications,  systems and  technologies  relating  to bar coded data,  magnetic
stripe  encoded data,  radio  frequency  communications  of bar coded or related
data,  optical  character   recognition,   machine  vision  as  applied  to  the
recognition  of bar coded data,  electronic  interchange of bar coded or related
data.  The  Business  of PSC shall also  include  any  business  in which PSC is
actually  engaged or as to which it is doing  research  and  development  during
O'Brien's employment with PSC.
<PAGE>

     7. Except as expressly  modified herein, all of the terms and conditions of
the Severance Letter shall remain in full force and effect.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.

                                    PSC Inc.


                                    By:      /s/ L. Michael Hone
                                             L. Michael Hone
                                             Chief Executive Officer and
                                             Chairman of the Board

                                             /s/ John F. O'Brien
                                             John F. O'Brien, President