EMPLOYMENT AGREEMENT

     THIS  AGREEMENT  is made as of June 2, 1998 by and between PSC Inc.,  a New
York   corporation   ("PSC"  or  the   "Company")   and  ROBERT  C.   STRANDBERG
("Executive").
                                    RECITALS

     PSC and Executive entered into an Employment  Agreement as of June 2, 1997,
which currently will expire on June 1, 1998.
     Executive  has  developed and  implemented  a  comprehensive  restructuring
program  and a  new  operating  plan  and  PSC  desires  to  retain  his  unique
experience, background, ability and services.
     Accordingly, the parties desire to amend in certain respects and restate in
its entirety said Employment Agreement.
     NOW, THEREFORE,  in consideration of the foregoing and the mutual covenants
contained in this Agreement, the parties agree as follows:

     1.  Employment.  PSC hereby  employs the  Executive as President  and Chief
Executive Officer. Executive hereby accepts such employment and agrees to remain
in the employ of PSC for the Term to perform any and all  reasonable  and lawful
duties  prescribed  by PSC's  Board of  Directors  and to abide by the terms and
conditions of this  Agreement.  During the Term, in good faith,  Executive shall
exert all  reasonable  efforts to promote the interests of the Company and shall
devote  substantially all of his entire working time,  attention and energies to
the business of the Company.
     2. Term of Employment.  The term of employment  under this Agreement  shall
commence as of the date of this  Agreement  and shall  terminate on December 31,
2000 (the "Initial  Term");  provided,  however that the term of this  Agreement
shall  be  automatically  extended  for  additional  one  year  terms  (each  an
"Additional Term") upon the end of the Initial Term, or any successor Additional
Term unless either the Executive or the Company shall have given written  notice
to the other at least seventy-five (75) days prior thereto that the term of this
Agreement shall not be so extended.
<PAGE>

     3. Compensation.

     A. Base Salary. For all services to be rendered to the Company by Executive
in any capacity, including, without limitation, services as an officer, director
or member of any committee of the Board of Directors and the  performance of any
duties  assigned to him by the Board of Directors,  PSC shall pay to Executive a
salary at the annual rate of not less than $300,000 ("Base Salary"). Base Salary
shall be payable in  accordance  with the  customary  payroll  practices of PSC,
subject to such deductions and  withholdings as may be required by law or agreed
to by Executive.

     B. Performance Bonus.  Pursuant to PSC's current Management  Incentive Plan
or any  successor  plan,  for any  calendar  year during the Initial Term or the
Additional  Term, if any, if and to the extent PSC achieves its  pre-established
performance  goals for such  calendar  year,  Executive  shall be  entitled to a
performance bonus for such year in an amount equal to the percentage of his then
existing  Base  Salary for such year set forth  opposite  the  performance  goal
percentage below:
                  % of Performance Goal Achieved   % of Base Salary
                  ------------------------------   ----------------
                    Threshold                               40%
                    Target                                  60%
                    133% of Target                          90%
                    150% of Target                          130%
                    170% of Target                          170%

     4.  Benefits.  In  addition  to his Base  Salary,  Executive  shall also be
entitled throughout the Term and the Additional Term, if any, to all benefits of
full  time  employees  or  officers  as  to  which  he  meets  the   eligibility
requirements  universally applicable to all employees and such other benefits as
may be accorded to other  senior  executives  by written  notification  from the
Company given from time to time.  The Company also agrees to pay the  initiation
fee and the monthly dues  associated  with  Executive's  membership in a country
club of Executive's choice.
     5. Restricted  Stock.  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  hereto as  Exhibit  A. If
Executive is then an officer of the Company, on each of March 25, 1999 and March
25, 2000, PSC will award Executive 37,500 restricted Common Shares pursuant to a
Restricted  Stock Award  Agreement  similar in form to Exhibit A, as modified to
reflect changes in dates and stock prices.

<PAGE>

     6. Confidential Information.  Executive agrees that during the Initial Term
and the  Additional  Term, if any, 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 or data of the
Company,  whether or not  patentable  or  copyrightable,  in any way acquired by
Executive  from the  inception of his  employment  with the Company  through the
expiration of the Term (hereinafter  "Confidential  Information").  Confidential
Information  for 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, ompositions,  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. pertaining to future developments, such as, but not limited to, research
and development, future marketing or merchandising plans or ideas.
     Immediately  upon  termination of  Executive's  services,  Executive  shall
deliver to the Company all originals and copies of everything in his  possession
or under his control which  embodies or contains any  Confidential  Information,
including,  without limitation, 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)  Employee  can show by  documentation  was
properly in his possession  prior to his employment  with the Company,  or (iii)
becomes available to Employee from an independent  source without breach of this
Agreement or violation  of law, or (iv) is  independently  developed by Employee
without the use of the Company's Confidential Information.

<PAGE>

     7. Covenant Not to Compete
     A. In light of the special and unique  services  that have been and will be
furnished to the Company by Executive and the Confidential  Information that has
been and will be disclosed to him during his employment,  Executive  agrees that
during the Initial  Term and the  Additional  Term,  if any, and for a period of
twenty-four (24) months thereafter (the "Non-Competition  Period"), he will not,
without the written consent of the Company,  directly or indirectly,  whether as
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 any where 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  Executive  from  owning not more than five  percent  (5%) of the
outstanding publicly traded shares of common stock of a corporation, as to which
corporation  Executive  has no  relationship  other  than as a  shareholder.  In
addition,  during the  Non-Competition  Period,  Executive 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
shareholder  thereof, (b) hire directly or through another entity any person who
is an  employee  of the  Company on the date of  termination  of  employment  of
Executive, 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.
     Executive specifically agrees that because of his special expertise and the
special and unique services that he will be furnishing the Company,  and because
of the  Confidential  Information  that has been acquired by him or that will be
disclosed  to him during  his  employment  with the  Company,  the above  stated
geographic  areas and time period,  in and during which he will not compete with
the Company,  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>

     B. If  Executive  in any way  breaches  the  obligations  specified in this
Section,  the Company  shall have the right,  in addition to any other  remedies
available  to it, to  terminate  the  further  payment of any amounts due or the
further provisions of any benefits under Sections 3 and 4 hereof.

     C. If any  provision  hereof is found to be  unreasonably  broad,  it shall
nevertheless  be  enforceable  to  the  extent  reasonably   necessary  for  the
protection  of the Company and to carry out to the fullest  extent the  parties'
mutual  intent  in  entering  into  this  Agreement,  which  intent  is that the
provisions of this Section will be strictly enforced as agreed to.

     D. For  purposes of this  Agreement,  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  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 and
electronic interchange of bar coded or related data. 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 Executive's employment with
the  Company.  Notwithstanding  anything to the  contrary in the  preceding  two
sentences, Business of the Company shall not include the manufacturing,  design,
engineering, distributing, marketing, selling or reselling of thermal or thermal
transfer bar code  printers,  bar code  verifiers or labeling  media and ribbons
used in connection with thermal bar code printers.

     8.  Injunctive  Relief.  Executive  agrees that in the event of a breach or
threatened  breach by the Employee of any of the  provisions  of Sections 6 or 7
hereof, the Company shall be entitled to an injunction restraining the Executive
from  such  breach  or  threatened  breach  without  posting  any  bond or other
security. Nothing herein, however, shall be construed as prohibiting the Company
from  pursuing,  in  conjunction  with an  injunction  or  otherwise,  any other
remedies  available  to the  Company  for  such  breach  or  threatened  breach,
including the recovery of damages from the Executive.

     9. Severance Payment.
     A. Termination of Employment - In General.  In the event of the termination
of employment  of Executive by the Company  prior to the  expiration of the Term
for any reason other than Termination for Cause (as hereinafter defined), death,
disability,  or a Change in Control (as hereinafter  defined),  the Company will
continue  to  pay  the  Executive  for a  period  of  one  year  following  such
termination or expiration of the Initial Term or any  Additional  Term an amount
equal to the  Executive's  Base Salary at the annual  rate then in effect.  Such
amount  shall be payable  bi-weekly.  In  addition,  the  Company  will  provide
Executive with  Executive's  then current  health,  dental,  life and accidental
death and  dismemberment  insurance  benefits for a period of one year following
such termination.  In the event of Executive's  death while receiving  severance
payments  hereunder,  all remaining  severance  installment  payments  otherwise
payable to Executive  hereunder will be paid in the same amounts and in the same
manner to  Executive's  heirs and legal  representatives.  All payments  made to
Executive hereunder will be subject to all applicable employment and withholding
taxes.

<PAGE>

     B.  Termination of Employment - Change in Control.  In the event  Executive
terminates  his employment for any reason within 90 days after the occurrence of
a Change in Control (as  hereinafter  defined) of the Company or in the event of
the termination of employment of Executive  within the two year period following
a  Change  in  Control  (as  hereinafter  defined)  of  the  Company,  and  such
termination  is (i) by the Company  for any reason  other than  Termination  for
Cause (as hereinafter  defined),  death or disability,  or (ii) by the Executive
for "Good Reason" (as hereinafter  defined),  the Company will pay the Executive
over a period of three years  following such  termination an amount equal to the
product of the sum of (x)  Executive's  Base  Salary at the annual  rate then in
effect and (y) the highest  annual bonus paid to Executive  under the  Company's
current Management Incentive Plan or any successor plan in the three full fiscal
years  preceding  termination  multiplied  by 2.9.  Such amount shall be payable
bi-weekly. In addition,  Executive will be immediately vested in any retirement,
incentive,  restricted  stock,  or option plans or agreements then in effect and
the Company will continue to provide  Executive  with  Executive's  then current
health,  dental, life and accidental death and dismemberment  insurance benefits
for a period of three years.  All payments made to Executive  hereunder  will be
subject to all applicable employment and withholding taxes.
     C. Limitations.  Notwithstanding  anything in this Section to the contrary,
the maximum amount of cash and other benefits  payable  (whether on a current or
deferred  basis and whether or not includible in income for income tax purposes)
under this Section  (the  "Severance  Benefits")  shall be limited to the extent
necessary to avoid causing any portion of such Severance Benefits,  or any other
payment  in the  nature of  compensation  to the  Executive,  to be treated as a
"parachute  payment"  within the meaning of Section  280G(b)(2)  of the Internal
Revenue  Code of 1986,  as  amended.  Any  adjustment  required  to satisfy  the
limitation  described in the preceding  sentence shall be accomplished  first by
reducing any cash  payments  that would  otherwise be made to the  Executive and
then,  if further  reductions  are  necessary,  by adjusting  other  benefits as
determined by the Company.

<PAGE>

     D. Certain Definitions.
     Change in Control.  A "Change in Control"  shall be deemed to have occurred
(i) on the date that any person or group deemed a person under Sections  3(a)(9)
and 13(d)(3) of the Securities  Exchange Act of 1934, other than the Company, in
a  transaction  or series of  transactions,  has  become the  beneficial  owner,
directly or indirectly (with  beneficial  ownership as determined as provided in
Rule  13d-3,  or any  successor  rule  under  such  Act),  of 20% or more of the
outstanding  voting securities of the Company;  or (ii) on the date on which one
third or more of the members of the Board of Directors  shall consist of persons
other than Current  Directors (for these  purposes,  a "Current  Director" shall
mean any member of the Board of  Directors  elected at or  continuing  in office
after,  the 1998 Annual  Meeting of  Shareholders,  any  successor  of a Current
Director who has been  approved by a majority of the Current  Directors  then on
the Board,  and any other  person  who has been  approved  by a majority  of the
Current  Directors  then on the Board);  or (iii) on the date of approval of (x)
the merger or  consolidation of the Company with another  corporation  where the
shareholders of the Company,  immediately  prior to the merger or consolidation,
would not  beneficially  own,  immediately  after the  merger or  consolidation,
shares  entitling  such  shareholders  to 50% or  more  of  all  votes  (without
consideration  of the  rights  of any  class of stock  to elect  directors  by a
separate  class  vote) to which all  shareholders  of the  corporation  would be
entitled  in the  election  of  directors  or where the  members of the Board of
Directors  of the  Company,  immediately  prior to the merger or  consolidation,
would not immediately after the merger or  consolidation,  constitute a majority
of the Board of Directors of the  corporation  issuing cash or securities in the
merger  or  consolidation  or (y) on the date of  approval  of the sale or other
disposition of all or substantially all the assets of the Company.

     Termination  for Cause.  The Company  shall have the right to terminate the
services of Executive at any time without  further  liability or  obligations to
Executive  if: (i)  Executive  has failed or refused to perform such services as
may  reasonably  be  delegated  or assigned to  Executive,  consistent  with the
Executive's position, by the Board of Directors, (ii) Executive has been grossly
negligent in  connection  with the  performance  of  Executive's  duties,  (iii)
Executive has committed acts involving dishonesty, willful misconduct, breach of
fiduciary  duty,  fraud,  or  any  similar  offense  which  materially   affects
Executive's  ability  to  perform  Executive's  duties  for the  Company  or may
materially adversely affect the Company, or (iv) Executive has been convicted of
a felony.

<PAGE>

     Termination  of the services of Executive  for Cause shall not be effective
unless  and until  acted  upon by the Board of  Directors  and  unless and until
written  notice  shall have been given to Executive  which notice shall  include
identification with specificity of each and every factual basis or incident upon
which the  termination  is based.  Notwithstanding  the preceding  sentence,  in
connection  with the  termination  of the services of Executive  for Cause under
section  (i)  above,  the Board of  Directors  shall  take no  action  until the
Executive has been provided written notice of the services  Executive has failed
or refused to perform and such failure or refusal remains unremedied for 30 days
after Executive has received such notice.
     Good Reason.  Good Reason shall mean the  occurrence or existence of any of
the following with respect to Executive:  (i) Executive's  annual rate of salary
is reduced from the annual rate then  currently in effect or  Executive's  other
employee  benefits  are in the  aggregate  materially  reduced  from  those then
currently in effect  (unless  such  reduction  of employee  benefits  applies to
employees of the Company generally),  or (ii) Executive's place of employment is
moved more than 25 miles from its then current  location,  or (iii)  Executive's
title is changed or he is assigned  duties that are  demeaning or are  otherwise
materially inconsistent with the duties then currently performed by Executive.
     Before  Executive may terminate his employment  for Good Reason,  Executive
must notify the Company in writing of his intention to terminate and the Company
shall have 15 days after  receiving such written notice to remedy the situation,
if possible.

     10.  Notices.  All notices given in connection with this Agreement shall be
in writing and shall be  delivered  either by personal  delivery,  by  telegram,
telex,  telecopy or similar  facsimile  means, by certified or registered  mail,
return receipt requested, or by express courier or delivery services,  addressed
to the parties hereto at the following addresses:

    To Strandberg:                  To PSC:

 Robert C. Strandberg               PSC Inc.
   3977 East Avenue             675 Basket Road
 Rochester, NY 14618           Webster, NY 14580
                              FAX: (716) 265-6409

or at such other  address  and  number as either  party  shall  have  previously
designated by written notice given to the other party in the manner  hereinabove
set forth.  Notice  shall be deemed  given when  received,  if sent by telegram,
telex,  telecopy or similar  facsimile  means  (confirmation  of such receipt by
confirmed facsimile  transmission being deemed receipt of communications sent by
telex,  telecopy or other facsimile means); and when delivered and receipted for
(or  upon  the  date of  attempted  delivery  where  delivery  is  refused),  if
hand-delivered,  sent  by  express  courier  or  delivery  services,  or sent by
certified or registered mail, return receipt requested.

<PAGE>

     11.  Waiver.  Any waiver of a breach of any of the terms of this  Agreement
shall not operate as a waiver of any other  breach of such terms or of any other
terms,  nor shall failure to enforce any term hereof  operate as a waiver of any
such term or of any other term.
     12. Severability.  If any term of this Agreement or the application thereof
is held invalid or  unenforceable,  the validity or  unenforceability  shall not
effect any other term of this  Agreement  which can be given effect  without the
invalid or unenforceable term.
     13. Governing Law; Venue. This Agreement shall be construed and enforced in
accordance  with and  governed  by the  internal  laws of the State of New York,
without  reference to conflict of law principles of any jurisdiction  (including
without  limitation  New York)  which  would  result in the  application  of the
domestic substantive laws of any other jurisdiction.  The parties consent to the
exclusive jurisdiction of the Supreme Court of New York, Monroe County or of the
United States District Court for the Western  District of New York for any legal
action  instituted  by any party  against any other with  respect to the subject
matter hereof.
     14. Prior  Agreements.  This Agreement  supersedes all previous  agreements
related to the subject matter herein.
     15.  Termination  of  Obligations.  Executive  agrees that in the event his
employment with the Company is terminated for any reason, that he will meet with
a representative of the Company and discuss, among other matters, the provisions
of this Agreement and the Executive's obligations hereunder.
     16. Entire Agreement.  This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended or changed except by a writing signed by both parties.
     IN WITNESS  WHEREOF,  Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.

                         PSC INC.

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


                         /s/ Robert C. Strandberg
                         Robert C. Strandberg