Exhibit 10.6
                                              Severance and Consulting Agreement


                       SEVERANCE AND CONSULTING AGREEMENT


THIS SEVERANCE AND CONSULTING AGREEMENT ("Agreement"), dated as of July 15, 1997
sets  forth the terms of the  agreement  between  Jay M.  Eastman  ("Employee"),
residing at 70 VanVoorhis Road,  Pittsford,  NY 14534, and PSC Inc. ("Company"),
located at 675 Basket Road, Webster,  New York 14580,  relating to the cessation
of  Employee's  employment  with  Company  and the  engagement  of Employee as a
consultant.  WHEREAS,  Employee  has been  associated  with the Company for many
years and has contributed to its successful growth. WHEREAS, the parties wish to
enter into this Agreement for the purpose of addressing  all issues  relating to
Employee's  termination  of  employment  with the Company.  NOW,  THEREFORE,  in
consideration of the mutual covenants hereinafter  described,  and the Severance
Payment  and other good and  valuable  consideration  to which  Employee  is not
otherwise entitled, Company and Employee agree as follows:

1.   Cessation of Employment.  The parties agree that Employee's  employment and
     all positions and offices with the Company,  except that as a member of the
     Company's   Board  of  Directors,   will  terminate  on  October  15,  1997
     ("Employment Termination Date").

2.   Severance Payment and Other Consideration.  The Company will pay or provide
     to Employee  the  following  amounts and benefits in  consideration  of the
     agreements contained in Sections 3, 4, 5, 6 and 7 of this Agreement.

(a)  The Company shall pay Employee  severance payments  ("Severance  Payments")
     for a period of six (6) months from the  Employment  Termination  Date (the
     "Severance Payment Period"), less applicable deductions for Federal and New
     York State  income tax  withholdings,  FICA,  and Medicare  Tax.  Severance
     payments  shall be made on the normal  payroll  dates for the Company.  The
     Company will include the above sum in the Form W-2 Wage and Tax  Statements
     which it will issue to Employee for the 1997 and 1998 calendar  years.  The
     aggregate  amount  of  Employee's  Severance  Payments  shall  be  equal to
     Employee's current semi-annual salary ($62,500).

(b)  Except as specifically  provided in this Agreement,  all employee  benefits
     shall be discontinued as of the Employment  Termination Date and, except as
     specifically provided in this Agreement,  Employee shall not be entitled to
     any other  compensation  bonuses or perquisites  from the Company.  Nothing
     contained in this Agreement shall affect Employee's entitlement to benefits
     under the Company's 401(k) plan (the "Plan") based upon Employee's  accrued
     service with the Company. For purposes of the Plan, Severance Payments will
     not be included in determining Employee's benefits under the Plan.
<PAGE>

(c)  Employee  heretofore  has been  granted  stock  options as set forth on the
     attached Exhibit A (the "Options"),  which by their terms will expire three
     months after the Employment  Termination Date. Some of the Options have not
     fully  vested.   In  consideration  of  Employee's   agreement  to  provide
     consulting  services as  described  in Section 3, to release the Company as
     described  in  Section  4,  not to  disclose  confidential  information  as
     described  in Section 5 and not to compete as  described  in Section 6, the
     Board of  Directors  of the  Company  will  cause all  unvested  Options to
     immediately  vest, and shall extend the  expiration  date on the Options to
     allow  Employee  to  exercise  any or all such  Options at their set option
     prices anytime on or before the last day of the Non-Competition  Period (as
     hereinafter  defined),  except,  however,  that no Option may be  exercised
     after  the  expiration  of ten  (10)  years  from the Date of Grant of such
     Option.  However,  as the result of extending the period in which  Employee
     may  exercise  the  options,  Employee  acknowledges  that the  Company has
     advised him that the  incentive  stock  options  will become  non-qualified
     stock options.  There is no income recognition on the exercise of incentive
     stock  options  but,  on the  exercise  of a  non-qualified  stock  option,
     Employee  would have to recognize as taxable income in the year of exercise
     an amount equal to the difference  between the fair market value of Company
     stock on the date of exercise and the exercise price Employee pays.

3.   Consulting Services.  From the Employment Termination date through the last
     day of the Non-Competition Period (as hereinafter defined) (the "Consulting
     Period") the Company engages Employee as an independent contractor, and not
     as an  employee,  to  render  consulting  services  to the  Company,  on an
     "as-needed" basis, in such matters as the Company's  litigation/arbitration
     with Symbol  Technologies,  Inc.,  patent  applications,  and in such other
     related  matters  as may be  requested  from  time  to  time  by the  Chief
     Executive  Officer of the Company,  and Employee  accepts such  engagement.
     Employee  shall  not have any  authority  to bind or act on  behalf  of the
     Company during the Consulting  Period.  During the Consulting  Period,  the
     Company shall pay Employee at Employee's  current  hourly rate ($60.10) for
     each hour of service  actually worked except that Employee will not be paid
     for time spent testifying in court or at an arbitration hearing. During the
     Consulting Period,  Employee,  shall not be entitled to any other benefits,
     bonuses or  perquisites  from the  Company.  The  Company  shall  reimburse
     Employee  for all  reasonable  expenses  incurred  by him in the  course of
     performing  his duties as a consultant to the Company under this  Agreement
     which are  consistent  with the  Company's  policies in effect from time to
     time with respect to travel,  entertainment  and other  business  expenses,
     subject  to the  Company's  requirements  with  respect  to  reporting  and
     documentation of such expenses.  Within ten (10) days after the end of each
     month,  Employee  shall submit to the Company an invoice,  with  supporting
     documentation, requesting payment for consulting services and reimbursement
     of business-related  expenses for the prior month.  Employee shall file all
     tax returns and reports required to be filed by him on the basis that he is
     an independent contractor,  rather than an employee, as defined in Treasury
     Regulation ss.31.3121(d)-1(c)(2),  and Employee shall indemnify the Company
     for the amount of any employment taxes paid by the Company as the result of
     Employee  not  withholding  employment  taxes from any  amount  paid to him
     hereunder.
<PAGE>

4.   Release.  (a) Employee agrees that the terms set forth in his Agreement are
     in full  satisfaction  of all obligations the Company has to Employee known
     and unknown.  Employee does hereby irrevocably and unconditionally  release
     the  Company,  its  affiliates,  officers,  directors,  employees,  agents,
     representatives, successors and assigns from any and all claims demands and
     liabilities whatsoever, including but not limited to any claims in contract
     or tort and any claims in connection  with  Employee's  employment with the
     Company,  the termination of that  employment,  or pursuant to any federal,
     state or local  employment  laws,  regulations,  executive  orders or other
     requirements,  as well as the common law,  including the Age Discrimination
     in Employment  Act. In exchange for the benefits being accorded to Employee
     under this Agreement, it is Employee's intent to provide to the Company the
     broadest  release of claims and  liabilities  that may be  provided by law.
     This  Agreement  shall not be construed as an admission by the Company that
     it has acted wrongfully with respect to the Employee.

(b)  The Company does hereby irrevocably and  unconditionally  release Employee,
     his heirs,  executors,  administrators and assigns from any and all claims,
     demands, or liabilities whatsoever which the Company had or may now have in
     any way related to or arising out of his  employment  and its  termination,
     provided,  however,  that Company does not release any claim of any conduct
     now unknown to the Company that may have been undertaken in bad faith.

5.   Non-disclosure  of Confidential  and Proprietary  Information and Return of
     Company Property.

(a)  Employee  acknowledges  that  Employee's work as an employee of the Company
     has exposed him to Confidential  Information of the Company.  "Confidential
     Information" includes, but is not limited to, matters which are not readily
     available to the public which are:

              (i) Of a technical  nature,  such as, but not limited to, methods,
                  know-how,  formulae,   compositions,   drawings,   blueprints,
                  compounds,  processes,   discoveries,   machines,  inventions,
                  computer programs and similar items;

              (ii)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 information about employees personnel records,
                  salary and benefits data, and personnel practices;

              (iii) Pertaining to future developments,  such as, but not limited
                  to,   research   and   development,    future   marketing   or
                  merchandising plans or ideas.
<PAGE>

(b)  Employee  represents  and agrees that he has not,  and for a period of five
     years  after the  Employment  Termination  Date,  or for so long as he is a
     director  of the  Company,  whichever  period is longer,  that he will not,
     directly or indirectly,  except to the extent  required by law: (1) reveal,
     divulge, make known, sell, exchange, give away, or otherwise dispose of, to
     any person,  firm, or  corporation,  any  Confidential  Information  of the
     Company or its business,  whether the same shall or may have been designed,
     developed,  or  originated  by the  Employee or  otherwise;  or (2) reveal,
     divulge, or make known to any person, firm or corporation,  the name of the
     Company's  customers.  This obligation shall not apply to information which
     (i)  is  acquired  from a  third  party  who,  to the  best  of  Employee's
     knowledge, is not in default of any obligation to the Company in disclosing
     such  information,  or (ii) is  already  in the  public  domain or known to
     Company's  competitors or the public generally or that becomes available to
     the public generally or the Company's competitors other than as a result of
     Employee's  breach of this Agreement.  All records (whether in hard copy or
     digital form),  books and computer discs relating in any manner  whatsoever
     to the Company shall be the exclusive property of the Company regardless of
     who actually prepared the original record or book. Employee represents that
     he did not copy or cause to have copied any such records or books except in
     the ordinary course of business.

(c)  Employee agrees to return within ten (10) days after Employment Termination
     Date, any keys,  computers,  equipment,  cellular phones,  pagers,  Company
     credit  cards  and  any  other  Company  property  in  his  possession  not
     previously  returned,  any  confidential or proprietary data or information
     concerning  the  business  and  activities  of the  Company,  its manner of
     operation,  plans,  processes,  or methods  of  obtaining  business  and/or
     customers or any other data or information,  including personnel and salary
     information  and  personnel  practices,   manuals,  handbooks,   documents,
     records,  monies,  and  securities  belonging  to the  Company,  and  other
     confidential and proprietary articles and material, which Employee acquired
     or has used in the course of, or as incident  to, his  employment  with the
     Company. Employee agrees that any charges to the cellular phones or Company
     credit  cards which are not  authorized  Company  business  expenses may be
     deducted  by the  Company  from  any  amounts  due to  Employee  hereunder.
     Notwithstanding the foregoing,  Company agrees that Employee may retain the
     Macintosh  laptop  computer which he has been using and the Company further
     agrees that all of Employee's notebooks,  when returned,  will be preserved
     until such time as in the opinion of Company's  outside patent counsel they
     are no longer needed.  When necessary to assist Employee in the performance
     of his consulting duties described in Section 3, he will be afforded access
     to the said notebooks with the said patent counsel.
<PAGE>

6.   Noncompetition/Non-Solicitation.  As further consideration for the benefits
     provided in this Agreement and in light of the special and unique  services
     that have been and will be furnished  to the Company by  Employee,  and the
     Confidential Information that has been disclosed to Employee by the Company
     during Employee's relationship with the Company, Employee agrees that for a
     period of eighteen (18) months from the Employment Termination Date, or for
     so long  as he is a  member  of the  Board  of  Directors  of the  Company,
     whichever period is longer,  (the  "Non-Competition  Period") Employee will
     not,  without the written  consent of the Company,  directly or indirectly,
     whether as a principal,  agent, officer,  director,  consultant,  employee,
     partner,  stockholder, or owner 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 the Company (as
     hereinafter defined).  However,  nothing herein shall prevent Employee from
     owning not more than five percent (5%) of the  outstanding  publicly traded
     shares of common stock of a corporation,  as to which corporation  Employee
     has no relationship other than stockholder. Company acknowledges that Lucid
     Technologies  Inc.  ("Lucid")  has not to date  been  competitive  with the
     Business of the Company as  hereinafter  defined.  In addition,  during the
     Non-Competition  Period,  Employee will not,  directly or  indirectly,  (a)
     induce or attempt to induce any officer or employee of the Company to leave
     the employ of the Company,  or in any way interfere  with the  relationship
     between the  Company and any  officer,  employee,  director or  stockholder
     thereof,  or (b) hire directly or through another entity any person who was
     an employee  of the  Company on the  Employment  Termination  Date,  or (c)
     induce or attempt to induce any customer,  dealer,  supplier or licensee to
     cease doing  business with the Company,  or in any way  interfere  with the
     relationship  between any such customer,  dealer,  supplier or licensee and
     the Company.

     Employee  specifically  agrees that because of Employee's special expertise
and the  special  and  unique  services  that  Employee  has  been  and  will be
furnishing the Company,  and because the Confidential  Information that has been
acquired by Employee or has been  disclosed  to Employee  during the  Employee's
employment,  the above  stated  geographic  areas and time period  during  which
Employee will not compete are reasonable in scope and duration and are necessary
to afford the Company  just and  adequate  protection  against  the  irreparable
damage which would result to the Company from any activities  prohibited by this
section.
<PAGE>

     For  purposes  of  this  section,  the  "Business  of the  Company"  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  strip 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, and
electronic  interchange  of bar coded or related data.  The Company  agrees that
Lucid's  ballot  reading  technology  is not  to be  deemed  "optical  character
recognition" within the meaning of the preceding  sentence.  The Business of the
Company shall also include any business in which the Company is actually engaged
or as to  which it is doing  research  and  development  during  the  Employee's
employment with the Company.

7.   Statements to Third Parties.

Employee agrees not to criticize, denigrate, or disparage Company, its officers,
directors,  managers,  supervisors,  or  employees,  or otherwise  engage in any
conduct  which  directly or  indirectly  impugns or reflects  negatively  on the
reputation or integrity of the Company, or any of such individuals,  or tends to
expose  the  Company,  or any of  such  individuals,  to  hatred,  ridicule,  or
contempt,  and Employee represents that he has not done so.  Notwithstanding the
foregoing  and for so long as  Employee  is a director of the Company he may, in
communications  with other  directors,  criticize  the  Company's  personnel  or
activities as may be appropriate in fulfilling his responsibilities.

8.   Continued  Cooperation.  Employee  agrees to  cooperate  with  Company with
     respect  to  matters  that  arose  during  or  related  to his  employment,
     including but not limited to, cooperation in connection with any litigation
     or governmental  investigation  or regulatory or other proceeding which may
     have arisen or which may arise  following the execution of this  Agreement.
     As part  of the  cooperation  agreed  to  herein,  Employee  shall  provide
     complete and truthful  information to the Company and their  attorneys with
     respect to any matter arising  during or related to Employee's  employment.
     Specifically, Employee shall make himself reasonably available to meet with
     Company  personnel  and  attorneys  and shall  provide to Company and their
     attorneys any and all documentary or other physical  evidence  pertinent to
     such matter.  Employee agrees to execute and deliver to the Company any and
     all agreements,  instruments and other documents  necessary or desirable to
     accomplish or to carry out the  provisions of this Severance and Consulting
     Agreement,  including without limitation,  the assignment and transfer,  to
     perfect the title,  and/or to obtain and promote the right to the Company's
     exclusive enjoyment of any improvements, inventions, ideas, suggestions and
     discoveries  made or  developed  by  Employee  while in the  employ  of the
     Company.  Notwithstanding the foregoing,  the Company  acknowledges that it
     has no claim to the  patent  applications  described  on  Exhibit B to this
     Agreement  despite the fact that they were discoveries made or developed by
     Employee  while  in  the  employ  of  the  Company.  Employee  agrees  when
     reasonably requested by the Company, to testify in any legal proceedings on
     behalf of the  Company  and to sign all lawful  papers and execute and sign
     any original,  additional,  provisional or reissue applications for letters
     patent with respect to such improvements,  inventions,  ideas,  suggestions
     and  discoveries  which may be necessary or  desirable  to  accomplish  the
     foregoing,  and to do all  lawful  acts to aid the  Company  to obtain  and
     enforce protection of their improvements,  inventions,  ideas,  suggestions
     and  discoveries in any and all countries.  If requested to do so, Employee
     will be provided  reasonable out of pocket  expenses  incurred in providing
     such testimony or assistance.  Finally,  Employee shall promptly notify the
     Company, within three business days, of his receipt from any third party or
     governmental entity of a request for testimony and/or documents, whether by
     legal  process  or  otherwise,  relating  to any matter  arising  during or
     relating to Employee's  employment.  Employee  agrees that his  cooperation
     hereunder is an integral part of this Severance Agreement.
<PAGE>

9.   Arbitration of Claims.  Any controversy or claim arising out of relating to
     this  Agreement,  or the  breach  thereof,  shall be  settled  by final and
     binding arbitration  initiated by either party in accordance with the Rules
     of the  American  Arbitration  Association,  and  judgment  upon the  award
     rendered by the arbitration may be entered in any court with  jurisdiction.
     Either party may apply to any court with  jurisdiction  to seek  injunctive
     relief to  maintain  the  status quo until the  matter is  resolved  by the
     arbitrator. The arbitration shall be conducted in Rochester, New York by an
     arbitrator selected from a panel of arbitrators of the American Arbitration
     Association. All fees and expenses of the arbitration shall be borne by the
     parties  equally,  and each  party  shall  bear the  expense  of their  own
     counsel,  experts,  witnesses and the preparation and presentation of proof
     in any  arbitration.  In view of the nature of Employee's  employment,  the
     Confidential  Information  which Employee received during the course of his
     employment, and his position with the Company, Employee agrees that Company
     would be  irreparably  harmed by any violation or  threatened  violation of
     this Agreement,  or any of the terms thereof, and therefore, in addition to
     any other  remedies which may be available to it, Company shall be entitled
     to any  injunction,  without the  necessity  of posting  bond,  prohibiting
     Employee from  committing  any  violation or  threatened  violation of this
     Agreement in a proceeding  in either the Supreme  Court of the State of New
     York sitting in Monroe County or in the U.S. District Court for the Western
     District of New York and Employee  hereby  consents to the  jurisdiction of
     said tribunals.

10.  Notices, Consents, Requests or Other Communications. All notices, consents,
     requests or other  communications to the Company under this Agreement shall
     be in writing and delivered by first class mail,  postage  prepaid,  to the
     Company at the above  address to the  attention  of the Vice  President  of
     Human  Resources  or at such other  address of or to the  attention of such
     other  officer or individual at the Company as may be designated in writing
     by the  Company  from time to time.  All  notices  to  Employee  under this
     Agreement  shall be in writing and  delivered by first class mail,  postage
     prepaid,  to Employee at the address set forth above or such other  address
     as may be designated in writing by Employee from time to time.
<PAGE>

11.  Construction, Severability and Applicable Law.

              (a)  All  understandings  and  agreements  previously  made by and
              between the parties are merged in this Agreement,  which fully and
              completely expresses the agreement of the parties.  This Agreement
              may not be changed or terminated and none of its provisions may be
              modified or waived,  except in writing  signed by both  parties to
              this Agreement.

              (b) If any covenant or provision or part thereof contained in this
              Agreement is determined to be void or unenforceable in whole or in
              part,  it shall not be deemed to affect or impair the  validity of
              any other covenant or part thereof or provision of this Agreement.
              To the extent any provision is held invalid or  unenforceable  for
              being too broad or  extensive,  it is the intention of the parties
              that the court  enforce  such  provision  to the  limits of proper
              scope or  breadth.  Each of the  provisions  contained  herein  is
              hereby declared to be a separate and distinct  covenant  severable
              one from the other,  and Company shall be entitled to enforce each
              such covenant to the fullest extent permitted by law, in equity or
              otherwise,  notwithstanding  that  any  other  or  others  of such
              covenants may not be enforceable,  and in all other respects, this
              Agreement shall remain in fully force and effect.

              (c) This  Agreement  shall be governed and construed in accordance
              with the laws of New York State.
<PAGE>

12.  Review and Revocation Periods. Employee acknowledges and agrees that he has
     been  advised to seek the advice of legal  counsel  before  executing  this
     Agreement,  that he fully understands the terms of this Agreement,  that he
     has entered into this Agreement knowingly,  voluntarily, and without threat
     or duress, that he has received this Agreement on October 24, 1997, and has
     had  twenty-one  (21) days to  consider  its terms prior to signing it, and
     that he may revoke this Agreement in writing within seven (7) days from the
     date that he signs it.

13.  Miscellaneous. The following provisions shall apply to this Agreement:

              (a) The section  headings  contained in this  Agreement  have been
              prepared for  convenience of reference only and shall not control,
              affect  the  meaning,  or be  taken  as an  interpretation  of any
              provision of this Agreement.

              (b)  Several  copies  of this  Agreement  may be  executed  by the
              parties,  each of  which  shall  be  deemed  an  original  for all
              purposes,  and all of which together shall  constitute but one and
              the same instrument.

              (c) If in one or more instances  either party fails to insist that
              the other party perform any of the terms of this  Agreement,  this
              failure  shall not be  construed  as a waiver by such party of any
              past, present,  or future right granted under this Agreement,  and
              the  obligations  of  both  parties  under  this  Agreement  shall
              continue in fully force and effect.
<PAGE>

13.  Binding Effect.  This Agreement shall be binding upon and will inure to the
     benefit of the parties, their heirs,  distributees,  legal representatives,
     transferees, successors, and assigns.

     IN WITNESS WHEREOF, the undersigned have duly executed this Agreement.

         PSC Inc.



        Robert C. Strandberg                                     Jay M. Eastman
        President and CEO


<PAGE>


                                    EXHIBIT A

                                 Jay M. Eastman
                                 Option Schedule


Date of Grant  No. of Shares Vesting Dates  Exercise Price Expiration Date*
-------------  ------------- -------------  -------------- ----------------

2/27/89          25,000        2/27/89      $1.00            4/15/99
9/1/92           10,000        9/1/95       $11.00           4/15/99
4/28/93          20,000       10/28/96      $6.25            4/15/99
1/7/94           16,000        1/7/97       $5.75            4/15/99
5/3/95           46,453        7/13/95      $8.88            4/15/99
1/12/96           4,375        1/12/97      $7.875           4/15/99
1/12/96           4,375        1/12/98      $7.875           4/15/99
1/12/96           4,375        1/12/99      $7.875           4/15/99
                -------

TOTAL           130,578





*BUT NO LATER THAN TEN (10) YEARS FROM DATE OF GRANT