Exhibit 10.12
                                                  1997 Management Incentive Plan

                                    PSC INC.
                            MANAGEMENT INCENTIVE PLAN


Section 1.        Purpose

         The purpose of the PSC Inc. Management Incentive Plan is to promote the
interests  of PSC Inc.  and its  shareholders  by  providing  certain of its key
executives  with an annual  incentive  whereby  a  significant  portion  of such
executive's  compensation  is  tied to the  achievement  of  preestablished  and
objective  performance  goals.  The Plan is designed to  attract,  motivate  and
retain  such  key  executives  on  a  competitive  basis  in  which  total  cash
compensation  levels are closely linked with the attainment of the Corporation's
financial and strategic objectives.

Section 2.        Definitions

         The following definitions are applicable to the Plan:

         2.1      "Board" means the Board of Directors of the Corporation.

         2.2 "Code"  means the Internal  Revenue  Code of 1986,  as amended from
time to time  and  the  regulations  promulgated  thereunder,  or any  successor
statute.

         2.3 "Committee"  means the Compensation  Committee of the Board or such
other  committee  as may be designed by the Board to  administer  the Plan,  and
shall  consist  only of  members  of the  Board  who are  not  employees  of the
Corporation  or any  affiliate  thereof and who  qualify as "outside  directors"
under Section 162(m) of the Code.

         2.4 "Corporation"  means PSC Inc., a corporation  established under the
laws of the State of New York, and its subsidiaries and affiliates.

         2.5 "Covered  Employee"  means a Participant who as of the close of the
Plan Year is the Chief  Executive  Officer of the  Corporation or among the four
highest  compensated  officers of the  Corporation for the Plan Year (other than
the chief  executive  officer) or who is otherwise  deemed a "covered  employee"
under Section 162(m) of the Code.

         2.6 "Eligible  Employee" means any executive  officer or manager of the
Corporation and its subsidiaries.

         2.7      "Incentive Award" means an award granted pursuant to Section 5
of this Plan.

         2.8  "Participant"  means any Eligible  Employee of the Corporation and
its  subsidiaries  who has been selected by the Committee to  participate in the
Plan during a Plan Year.

         2.9      "Plan" means the PSC Inc. Management Incentive Plan, as may be
amended and restated from time to time.

         2.10     "Plan Year" means the Corporation's fiscal year, or such other
period as designated by the Committee.
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Section 3.        Administration of the Plan

         The Plan shall be  administered  by the Committee.  The Committee shall
have full  authority to  interpret  the terms of the Plan,  to adopt,  amend and
rescind rules and guidelines for the  administration of the Plan and for its own
acts and proceedings,  to select Participants,  to grant annual Incentive Awards
thereto and to decide all  questions and settle all  controversies  and disputes
which may arise in  connection  with the Plan.  The  Committee  shall report any
action taken by it to the meeting of the Board next following  such action.  The
decision  of the  Committee  on any  matter as to which the  Committee  is given
authority shall be final and binding on all persons concerned.  No member of the
Committee  shall be liable  for any action or  determination  made in good faith
with respect to the Plan.

Section 4.        Eligibility and Participation

         Within the first 90 days of each Plan Year, the Committee  shall select
the Participants in the Plan for such year from among the Eligible  Employees of
the  Corporation  and its  subsidiaries.  Directors who are full-time  executive
officers of the Corporation shall be eligible to participate in the Plan.

         Additional  Participants  may be approved by the  Committee  during the
Plan Year only in the event of  unusual  circumstances,  such as a new hire or a
promotion.

         Each  Participant will be notified in writing at the time of his or her
selection as a Participant,  of the amount and terms of his or her target annual
Incentive Award as determined in Section 5 below.

Section 5.        Annual Incentive Awards

         5.1 Individual  Awards.  Each Participant in the Plan shall be eligible
to receive  such annual  Incentive  Award,  if any, for each Plan Year as may be
payable  pursuant to the  performance  criteria  described in Section 5.2 below.
Except as provided in Section 7 below,  the Committee shall, on an annual basis,
establish a "target  annual  Incentive  Award" for each  Participant  equal to a
percentage of such Participant's base salary for such Plan Year, and the maximum
amount of a target annual  Incentive  Award that may be awarded to a Participant
for a Plan Year shall be 60% thereof.  An  individual  who becomes a Participant
after the  beginning  of a Plan Year shall be  entitled  to an annual  Incentive
Award  prorated to reflect  such  Participant's  number of months  participating
during the Plan Year.


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         5.2  Performance  Criteria  and  Goals.  Participants  shall have their
annual  Incentive  Awards,  if any,  determined  on the  basis of the  degree of
achievement of performance  goals which shall be established by the Committee in
writing  within  the first 90 days of each Plan  Year and which  goals  shall be
stated in terms of the attainment of specified  levels of or percentage  changes
(as compared to a prior measurement  period) in any one or more of the following
measurements:  the Corporation's  revenue,  sales growth,  earnings per share of
Common Stock, net income, return on equity,  return on capital employed,  return
on assets,  total stockholder  return or cash flow, or any combination  thereof.
The Committee shall, for each Plan Year, establish the performance goal or goals
from among the  foregoing to apply to each  Participant  and a formula or matrix
prescribing the extent to which such Participant's  annual Incentive Award shall
be earned  based  upon the degree of  achievement  of such  performance  goal or
goals.  The Committee may determine that the annual  Incentive  Award payable to
any  Participant  shall  be based  upon  the  attainment  of  performance  goals
comparable  to those  specified  above  but in whole or in part  applied  to the
results of a subsidiary,  division or sector of the  Corporation  for which such
Participant has substantial responsibility.

         5.3 Change in Target Annual  Incentive  Award. A  Participant's  target
annual  Incentive  Award or  performance  goals may be changed by the  Committee
during the Plan Year to reflect a change in responsibilities;  provided that any
such change  shall be made in a manner  consistent  with  Section  162(m) of the
Code.

         5.4 Ability to Reduce or Increase  Awards.  The  Committee  may, in its
sole and absolute  discretion,  decrease the amount of, or eliminate,  an annual
Incentive  Award  otherwise  payable  to a  Participant  even  though  earned in
accordance with the performance goals established pursuant to this Section 5, if
the Committee deems such action warranted based on other circumstances  relating
to the performance of the Corporation or the Participant. Except with respect to
annual Incentive Awards payable to Covered Employees,  and  notwithstanding  the
failure to satisfy the applicable  performance  goals,  the Committee shall also
have the sole  discretion  to increase  the amount of any  Participant's  annual
Incentive Award to reflect individual  performance and/or unanticipated factors.
In no event,  however,  shall the Committee  have the discretion to increase the
amount of an annual Incentive Award to a Covered Employee.

         5.5 Performance Goal  Certification.  With respect to each Participant,
no annual  Incentive  Award  shall be  payable  hereunder  except  upon  written
certification by the Committee that the performance goals have been satisfied to
a particular  extent and that any other material terms and conditions  precedent
to  payment  of an  annual  Incentive  Award  pursuant  to the  Plan  have  been
satisfied.
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         5.6      Maximum Award Payable.  The  maximum  annual Incentive  Award
payable to any Participant for any Plan Year shall be $700,000.

Section 6.        Payment of Annual Incentive Award

         Subject  to  Section  5.5,  payment  of  any  amount  to be  paid  to a
Participant  based upon the degree of attainment of the  applicable  performance
goals shall be made as promptly as practicable after the end of the Plan Year.

Section 7.        Termination of Employment; Change-in-Control

         7.1 A Participant whose employment  terminates during the Plan Year for
any reason  (whether as the result of death,  retirement,  disability,  leave of
absence or otherwise) and who is not an employee of the  Corporation on the last
day of the Plan Year shall not be entitled to the payment of an Incentive  Award
for that Plan Year, except as the Committee may otherwise  determine in its sole
discretion.  Notwithstanding  the above, if as a result of a Change-in-Control a
Participant  retires, is assigned to a different position,  is placed on a leave
of absence of if the  Participant's  employment is terminated  before the end of
the Plan Year (except for cause), he or she shall receive a full Incentive Award
for that Plan Year.

         7.2      For purposes of the Plan, "Change-in-Control" means

                  (a) any "person" as such term is used in Section  13(d) of the
Securities  Exchange Act of 1934, as amended,  (the "Exchange  Act") (other than
the Corporation) is or becomes the "beneficial  owner" (as defined in Rule 13d-3
under  the  Exchange  Act),  directly  or  indirectly,   of  securities  of  the
Corporation  representing  30% or  more  of the  combined  voting  power  of the
Corporation's then outstanding securities;

                  (b) during any period of two  consecutive  years,  individuals
who at the beginning of such period  constitute the Board,  and any new director
whose election by the Board was approved by a vote of at least  two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the period or whose  election was previously so approved cease for any reason
to constitute at least a majority thereof;

                  (c) the  shareholders of the  Corporation  approve a merger or
consolidation of the Corporation with any other company, other than (1) a merger
or consolidation  which would result in the voting securities of the Corporation
outstanding  immediately  prior  thereto  continuing  to  represent  (either  by
remaining  outstanding  or by being  converted  into  voting  securities  of the
surviving  entity)  more than 50% of the  combined  voting  power of the  voting
securities of the Corporation or such surviving entity  outstanding  immediately
after such merger or consolidation or (2) a merger or consolidation  effected to
implement a  recapitalization  of the  Corporation  (or similar  transaction) in
which  no  "person"  (as  hereinabove  defined)  acquires  more  than 50% of the
combined voting power of the Corporation's then outstanding securities;

                  (d) the  shareholders  of the  Corporation  approve  a plan of
complete  liquidation  of the  Corporation  or an  agreement  for  the  sale  or
disposition by the Corporation of all or substantially  all of the Corporation's
assets.

Section 8.        Participant's Interests

         A Participant's  interest in any annual Incentive Award hereunder shall
at all times be reflected on the Corporation's  books as a general unsecured and
unfunded  obligation of the  Corporation  subject to the terms and conditions of
the Plan.  The Plan shall not give any person any right or security  interest in
the income or in any asset of the  Corporation.  Neither  the  Corporation,  the
Board,  nor the Committee  shall be responsible  for the adequacy of the general
assets of the Corporation to discharge the payment of its obligations  hereunder
nor shall the Corporation be required to reserve or set aside funds therefor.

Section 9.        Non-Alienation of Benefits; Beneficiary Designation

         All rights and benefits under the Plan are personal to the  Participant
and neither the Plan nor any right or  interest  of a  Participant  or any other
person arising under the Plan is subject to voluntary or involuntary alienation,
sale, transfer, or assignment without the Corporation's consent.  Subject to the
foregoing, the Corporation shall establish such procedures as it deems necessary
for a  Participant  to designate  one or more  beneficiaries  to whom any annual
Incentive Award payment the Committee determines to make would be payable in the
event of the Participant's death.

Section 10.       Withholding for Taxes

         Notwithstanding  any other provisions of this Plan, the Corporation may
withhold from any annual  Incentive Award payment made by it under the Plan such
amount or amounts as may be required for purposes of complying with any federal,
state and local tax or withholding requirements.
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Section 11.       Rights of Employees

         Nothing in the Plan shall  interfere with or limit in any way the right
of the  Corporation  or any of its  subsidiaries  or  affiliates  to terminate a
Participant's  employment at any time, or confer upon any  Participant any right
to continued  employment  with the  Corporation  or any of its  subsidiaries  or
affiliates.

Section 12.       Adjustment of Awards

         The Committee shall be authorized to make  adjustments in the method of
calculating  attainment  of  performance  goals in  recognition  of  unusual  or
nonrecurring  events  affecting the  Corporation or its financial  statements or
changes in applicable  laws,  regulations  or accounting  principles;  provided,
however,  that no such  adjustment  shall  impair the rights of any  Participant
without  his or her  consent  and that any  such  adjustment  shall be made in a
manner consistent with Section 162(m) of the Code. The Committee may correct any
defect,  supply any omission or reconcile any  inconsistency  in the Plan or any
annual  Incentive  Award in the manner and to the extent it shall deem desirable
to carry it into effect.

Section 13.       Amendment or Termination

         The Committee may, in its sole and absolute discretion,  amend, suspend
or  terminate  the  Plan  at  any  time,  with  or  without  advance  notice  to
Participants.  No  such  amendment,  suspension  or  termination  shall  alter a
Participant's  right to receive the payment of an annual  Incentive  Award for a
Plan Year already ended.

         The Committee  may, from time to time,  amend the Plan in any manner if
the Committee  determines  that such  amendment may be made without  shareholder
approval and without  jeopardizing  qualification of the annual Incentive Awards
as performance-based compensation under Section 162(m) of the Code.

Section 14.       Effective Date

         The Plan shall become effective as of January 1, 1997.

Section 15.       Applicable Law

         The Plan and all rights  thereunder  shall be governed by and construed
in accordance with the laws of the State of New York.