SECOND AMENDMENT
                                       TO
                              EMPLOYMENT AGREEMENT


         This  Second  Amendment  is dated  as of July  13,  1999 and is made in
respect  of the  Employment  Agreement  dated as of June 2,  1998 and the  First
Amendment  thereto  dated as of  December  11,  1998 (as  amended  and in effect
immediately prior to the date hereof, the "Employment Agreement") by and between
PSC  INC.,  a New York  corporation  ("PSC"  or the  "Company"),  and  ROBERT C.
STRANDBERG ("Executive").

         WHEREAS, Section 3A of the Employment Agreement provides that Executive
will  receive  a salary at the  annual  rate of not less  than  $300,000  ("Base
Salary"); and

         WHEREAS,   after  the  completion  of  a  performance   review  and  in
recognition of the effective performance of the Company and the Executive during
the past year,  the Board of Directors  deems it  appropriate  and  desirable to
increase the Base Salary of Executive by 12%; and

         WHEREAS,  Section 5 of the Employment Agreement provides that Executive
will be awarded 37,500  restricted Common Shares of the Company on each of March
25, 1999 (the "1999 Award") and March 25, 2000; and

         WHEREAS,  the 1999  Award was not made on March 25,  1999  because of a
lack of a  sufficient  number  of  shares  in the 1994  Stock  Option  Plan (the
"Plan"); and

         WHEREAS,  at the  1999  Annual  Meeting  held  on  May  12,  1999,  the
shareholders  of the  Company  approved  an  increase  in the  number  of shares
allocated to the Plan and, accordingly, the 1999 Award can now be made; and

         WHEREAS,  Executive  has  requested  that  the  equity  portion  of his
compensation  be in the form of stock  options  for Common  Shares  rather  than
awards of restricted Common Shares,  and the Board of Directors has consented to
the change; and

         WHEREAS,  the number of stock  options that is equivalent to the number
of restricted  Common Shares that otherwise would have been awarded to Executive
is 75,000 shares; and

         WHEREAS,  the Board of  Directors  has adopted a policy  whereby  stock
option grants to officers and directors in 1999 will be reduced by 50%; and
<PAGE>

         WHEREAS,  Executive is willing to accept a 50%  reduction in the number
of stock options to be granted to him in 1999.

         NOW,  THEREFORE,  in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:

         1.  All of the  terms  used in this  Second  Amendment  shall  have the
meanings defined in the Employment Agreement.

         2. Effective as of June 2, 1999, the Base Salary of Executive set forth
in Section 3A of the Employment Agreement is changed from $300,000 to $336,000.

         3.  Effective  as of  March  25,  1999,  Section  5 of  the  Employment
Agreement  is deleted in its entity and  replaced by a new Section 5, which will
read as follows:
                    "5.  Restricted   Stock/Stock   Options.   Pursuant  to  the
                  Company's  1994  Stock  Option  Plan,  on March  25,  1998 PSC
                  awarded  Executive  37,500  restricted  Common  Shares  of the
                  Company,  upon the terms and  conditions  and  subject  to the
                  restrictions set forth in the Restricted Stock Award Agreement
                  attached to the  Employment  Agreement as Exhibit A. Effective
                  as of March 25,  1999,  the  Company  has  granted  Executive,
                  pursuant to the  Company's  1994 Stock  Option  Plan,  a stock
                  option for 37,500  Common Shares of the Company at an exercise
                  price of $8.625 per share,  upon the terms and  conditions set
                  forth in the Stock Option Agreement attached hereto as Exhibit
                  A. If  Executive  is an  officer  of the  Company on March 25,
                  2000,  PSC will  grant  Executive  a stock  option  for 75,000
                  Common Shares pursuant to a Stock Option Agreement  similar in
                  form to Exhibit A, as modified to reflect  appropriate changes
                  in grant,  vesting and  expiration  dates and in purchase  and
                  stock  performance   prices.   Notwithstanding  the  foregoing
                  sentence,  if there is a Change  in  Control  (as  hereinafter
                  defined),   and  if  Executive  becomes  entitled  to  receive
                  Severance Benefits (as hereinafter defined), Executive will be
                  immediately   entitled  to  receive  the  stock  option  which
                  otherwise  would have been  granted to him on March 25,  2000,
                  fully vested and  exercisable and at a purchase price equal to
                  the Fair Market Value of the  Company's  Common  Shares on the
                  date preceding the date of the Change in Control."

         4.  Except  as  modified  by  this  Second  Amendment,  the  Employment
Agreement  shall  remain in full  force and effect  and is hereby  ratified  and
confirmed.
         IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
executed as of the day and year first above written.

                                              PSC Inc.


                                              By: /s/ Robert S. Ehrlich
                                                  Robert S. Ehrlich
                                                  Chairman of the Board



                                                  /s/ Robert C. Strandberg
                                                  Robert C. Strandberg


<PAGE>



                                    EXHIBIT A

                                    PSC INC.

                          OPTION AGREEMENT PURSUANT TO
                             1994 STOCK OPTION PLAN


         OPTION  AGREEMENT,  executed in  duplicate  as of the 13th day of July,
1999,  between PSC INC., a New York corporation  (the "Company"),  and ROBERT C.
STRANDBERG, an employee of the Company (the "Optionee").

                                    RECITALS

         Optionee entered into an employment  agreement with the Company on June
2, 1998, the First  Amendment to the  employment  agreement on December 11, 1998
and the Second  Amendment  to the  employment  agreement on July 13, 1999 (as so
amended, the "Employment Agreement").

         In accordance  with the provisions of the Employment  Agreement and the
1994 Stock Option Plan of the Company (the "Plan"),  the Compensation  Committee
of the Board of  Directors  of the  Company has  authorized  the  execution  and
delivery of this Agreement on the terms and conditions herein set forth.

         NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter
set forth and for other good and  valuable  consideration,  the  parties  hereto
agree as follows:

         1. Grant of Option. Subject to all the terms and conditions of the Plan
and this  Agreement,  the Company  hereby grants to the Optionee as of March 25,
1999 (the "Date of Grant") a stock option  ("Option") to purchase  37,500 common
shares of the Company  (such number being  subject to  adjustment as provided in
Section 9), $.01 par value, on the terms and conditions herein set forth.

         2. Purchase Price.  The purchase price per common share covered by this
Option shall be $8.625.

         3. Type of Option. In accordance with the terms of  Section 422  of the
Internal  Revenue  Code of 1986,  as  amended,  the  Option  granted  under this
Agreement  shall be an  Incentive  Stock  Option  ("ISO") to the extent that the
aggregate fair market value of the shares which Optionee may purchase  hereunder
for the  first  time in any  calendar  year  (and  under  all such  plans of the
Company) does not exceed $100,000.
<PAGE>

         4.       Vesting and Exercise.  This Option shall vest and be
exercisable as follows:

                  (a)      with respect to 18,750 shares:

                           4,688 on March 25, 2000

                           4,687 on March 25, 2001

                           4,688 on March 25, 2002

                           4,687 on March 25, 2003

                  (b)      with respect to 18,750 shares:

                            6,250 shares at such time as the Fair Market
                            Value  (as  defined  in  the  Plan)  of  the
                            Company's  common  shares  equals or exceeds
                            $11.47 per share for 7  consecutive  days at
                            any time subsequent to the Date of Grant

                            6,250 shares at such time as the Fair Market
                            Value of the Company's  common shares equals
                            or   exceeds   $13.53   per   share   for  7
                            consecutive  days at any time  subsequent to
                            the Date of Grant

                            6,250 shares at such time as the Fair Market
                            Value of the Company's  common shares equals
                            or   exceeds   $15.70   per   share   for  7
                            consecutive  days at any time  subsequent to
                            the Date of Grant

                  (c)      Notwithstanding  that  the Fair  Market  Value of the
                           Company's  common shares does not reach the specified
                           performance  goals in (b) above,  this Option will be
                           fully exercisable after December 1, 2003.

                  (d)      This Option may not be exercised after five (5) years
                           from the Date of Grant (March 25, 2004 ).

         5. Method of  Exercising  Option.  The Optionee may exercise the Option
granted to Optionee by giving  written  notice to the Company  which shall state
the  election  to exercise  the Option and the number of shares with  respect to
which the Option is being  exercised.  The written notice shall be signed by the
person exercising the Option, shall be delivered to the Company at its principal
executive office, and shall be accompanied by payment equal to the full purchase
price for the  shares  which are  exercised.  The  purchase  price of each share
purchased  upon  exercise of the Option shall be paid in full (a) in cash at the
time of exercise,  (b) with common  shares of the Company owned by the Optionee,
(c) by delivering  to the Company (i)  irrevocable  instructions  to deliver the
stock  certificates  representing  the  shares  for  which  the  Option is being
exercised,  directly to a broker,  and (ii)  instructions  to the broker to sell
such shares and  promptly  deliver to the  Company  the portion of the  proceeds
equal to the  total  purchase  price,  or (d) in any  combination  thereof.  For
purposes of making payment in common shares of the Company, such shares shall be
valued  at their  Fair  Market  Value  (as  defined  in the Plan) on the date of
exercise of the Option and shall have been held by the  Optionee for a period of
at least six (6) months.  Such notice shall be given on the form attached hereto
and designated as Exhibit A. In the event the Option shall be exercised pursuant
to Section 7(b) hereof by any person or persons  other than the  Optionee,  such
notice shall be accompanied by appropriate  proof of the right of such person or
persons to exercise the Option.
<PAGE>

         6.  Non-Transferability  of Option  Rights.  This  Option  shall not be
transferable  by the  Optionee  except  by will or by the  laws of  descent  and
distribution.  During the life of the Optionee,  the Option shall be exercisable
only by Optionee.  More particularly (but without limiting the generality of the
foregoing),  the Option may not be  assigned,  transferred  (except as  provided
above),  pledged,  or  hypothecated  in any  way,  shall  not be  assignable  by
operation of law, and shall not be subject to  execution,  attachment or similar
process. Any attempted assignment,  transfer,  pledge,  hypothecation,  or other
disposition of the Option contrary to the provisions hereof, and the levy of any
execution,  attachment,  or similar  process upon the Option,  shall be null and
void and without effect.

         7.       Termination of Employment or Death

                  (a) If the  employment of Optionee  shall  terminate for Cause
(as  defined  in the  Employment  Agreement),  this  Option  shall  cease  to be
exercisable on the date of such termination.

                  (b) If Optionee's  employment shall terminate because of death
or  Disability  (as  defined  in the  Plan),  or if  Optionee  shall  die  after
termination  of employment  but while Optionee could have exercised this Option,
this Option may be exercised, to the extent that the Optionee was entitled to do
so at the date of termination of employment,  at any time, or from time to time,
within one year after the date of death or termination of employment  because of
Disability, but in no event later than the expiration date specified pursuant to
Section  4.  In the  case of  death,  exercise  may be  made  by the  Optionee's
Designated Beneficiary (as defined in the Plan).

                  (c) If Optionee's  employment  shall  terminate for any reason
other  than  Cause,  death,  Disability,  Change in Control  (as  defined in the
Employment Agreement),  or Good Reason (as defined in the Employment Agreement),
Optionee must exercise this Option, to the extent Optionee was entitled to do so
at the date of  termination  of  employment,  at any time, or from time to time,
within three months after the date of termination of employment, but in no event
later than the expiration date specified pursuant to Section 4.
<PAGE>

         8. General Restriction. This Option shall be subject to the requirement
that if at any time the Board of Directors  in its  discretion  shall  determine
that the listing,  registration or  qualification  of the shares subject to such
Option on any  securities  exchange  or under any state or federal  law,  or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition  of, or in  connection  with,  the granting of such Option or the
issuance or purchase of shares  thereunder,  such Option may not be exercised in
whole or in part unless such listing,  registration,  qualification,  consent or
approval  shall  have been  effected  or  obtained  free of any  conditions  not
acceptable to the Board of Directors.

         9. Option Adjustments. In the event of a stock dividend, stock split or
other  change in  corporate  structure or  capitalization  affecting  the common
shares or any other transaction (including, without limitation, an extraordinary
cash dividend) which, in the  determination  of the Compensation  Committee (the
"Committee")  of the Board of Directors,  affects the common shares such that an
adjustment  is required in order to preserve the benefits or potential  benefits
intended to be made available under the Plan, then the Committee shall equitably
adjust any or all of (i) the number and kind of shares  subject to this  Option,
and (ii) the purchase  price with respect to the  foregoing,  provided  that the
number of shares  subject to this Option shall always be a whole number.  In the
event of any tender offer or exchange offer (other than an offer by the Company)
for the Company's common shares, or a dissolution or liquidation of the Company,
or a merger or consolidation or similar  transaction in which the Company is not
the  surviving  company,  or a sale,  exchange  or other  disposition  of all or
substantially all of the Company assets, or a "Change in Control" of the Company
(as defined in the Employment  Agreement),  or the termination of employment for
Good  Reason  (as  defined  in  the   Employment   Agreement),   Optionee  shall
automatically  become  fully  vested in this Option and this Option shall become
fully exercisable.

         10.  Amendment to this Option  Agreement.  The  Committee may modify or
amend this Option if it determines,  in its sole  discretion,  that amendment is
necessary or advisable in the light of any addition to or change in the Internal
Revenue Code or in the regulations  issued  thereunder,  or any federal or state
securities  laws or other law or regulation,  which change occurs after the Date
of Grant of this Option and by its terms applies to this Option. No amendment of
this Option, however, may, without the consent of the Optionee, make any changes
which would adversely effect the rights of such Optionee.

         11. Disqualifying Disposition. In the event that Optionee shall sell or
transfer any common shares acquired upon the exercise of the ISO portion of this
Option prior to the later of (a) two (2) years from the Date of Grant or (b) one
(1) year from the date of exercise of the Option,  Optionee  agrees to so advise
the Company  immediately  and to  promptly  pay to the Company the amount of any
Federal, State or Local taxes that may be required.
<PAGE>

         12. Right of Employment. Nothing contained herein shall confer upon the
Optionee any right to be continued in the employment of the Company or interfere
in any way with the right of the Company to terminate  Optionee's  employment at
any time for any cause.

         13. Definitions.  Any terms or provisions used herein which are defined
in Sections 421, 422 or 425 of the Internal Revenue Code of 1986, as amended, or
the regulations  thereunder or  corresponding  provisions of subsequent laws and
regulations in effect at the time this Option is granted shall have the meanings
as therein defined.

         14.  Notices.  Notices  hereunder  shall  be in  writing  and if to the
Company shall be delivered  personally to the Secretary of the Company or mailed
to its principal office, 675 Basket Road, P.O. Box 448, Webster, New York 14580,
addressed to the  attention of the Secretary  and, if to the Optionee,  shall be
delivered personally or mailed to the Optionee at Optionee's address as the same
appears on the records of the Company.

         15.   Interpretations   of   this   Agreement.    All   decisions   and
interpretations  made by the  Committee  with  regard  to any  question  arising
hereunder or under the Plan shall be binding and  conclusive  on the Company and
the Optionee.  The Option granted hereunder,  and the common shares which may be
issued upon exercise thereof,  are subject to the provisions of the Plan. In the
event there is any  inconsistency  between the  provisions of this Agreement and
those of the Plan, the provisions of the Plan shall govern.

         16. Successors and Assigns.  This Agreement shall bind and inure to the
benefit of the parties hereto and the successors and assigns of the Company and,
to the extent provided in Section 7, to the personal  representatives,  legatees
and heirs of the Optionee.

         IN WITNESS WHEREOF,  the Company has caused this Option Agreement to be
executed on the day and year first above written.

                                PSC INC.

                                By  /s/ Robert S. Ehrlich
                                    Robert S. Ehrlich, Chairman of the Board
ATTEST:

/s/ Martin S. Weingarten
Martin S. Weingarten, Secretary


<PAGE>



                                   ACCEPTANCE

         I,  ROBERT C.  STRANDBERG,  hereby  certify  that I have read and fully
understand the foregoing Stock Option Agreement.  I acknowledge that I have been
apprised that it is the intent of the Company that  Optionees  obtain and retain
an equity  interest in the Company.  I hereby execute this Agreement to indicate
my acceptance of this Option and my intent to comply with the terms thereof.




                                 ---------------------------------------
                                 Optionee


                                 ---------------------------------------
                                 Street Address


                                 --------------------------------------
                                City               State            Zip



<PAGE>

                                    EXHIBIT A

                                                         _________________, 19__

PSC Inc.
675 Basket Road
P.O. Box 448
Webster, New York  14580

Attention:  Secretary

Dear Sir:

         This is to notify you that I hereby elect to exercise my option  rights
to common shares of PSC Inc. (the "Company")  granted under the Option Agreement
(the "Agreement"),  dated , 19__, issued to me pursuant to the 1994 Stock Option
Plan (the "Plan").  The purchase price pursuant to such Agreement,  as adjusted,
is $____________ per share or $__________ in the aggregate.

         In payment of the full purchase  price, I enclose  (please  complete as
appropriate):

         (a)      my check in the sum of $__________

         (b)      __________  common  shares of the Company  owned by me free of
                  any liens or  encumbrances  and having a fair market  value of
                  $_________

         (c)      an authorization  letter which gives irrevocable  instructions
                  to the Company to deliver the stock certificates  representing
                  the shares for which the option is being exercised directly to
                  _____________  (name and  address of broker)  together  with a
                  copy of the instructions to  _______________  (name of broker)
                  to sell such  shares and  promptly  deliver to the Company the
                  portion of the proceeds  equal to the total purchase price and
                  withholding taxes due, if any.

                                Very truly yours,




                              Optionee's Signature