Document:

<PAGE>   1
                                                                   Exhibit 10.26

February 27, 2001

TransAct Technologies Incorporated
Seven Laser Lane
Wallingford, Connecticut 06492

Ladies and Gentlemen:

      Reference is made to the indebtedness owed to us ("BANK") by you
("BORROWER") pursuant to the terms and conditions of that certain Revolving
Credit Agreement dated September 21, 2000 between the Borrower and the Bank (the
"AGREEMENT"). Such indebtedness includes a revolving loan in the maximum
aggregate principal amount of up to $12,000,000 (the "LOAN") which is evidenced
by a Revolving Credit Note in such amount dated September 21, 2000 (the "NOTE").
Capitalized terms used herein but not defined herein have the meanings ascribed
to such terms in the Agreement.

      You have requested the Bank (i) to make available to the Borrower
Revolving Credit Loans in amounts in excess of the amounts that would be
available under clause (a) of the definition of Borrowing Base, and (ii) to
amend certain financial covenants, and the Bank has agreed thereto on the terms
and conditions set forth herein. Accordingly, the Borrower and the Bank have
agreed as follows:

      1. As an inducement to and in consideration of the Bank's agreements
contained herein, Borrower represents, warrants and acknowledges to the Bank
that (a) all representations and warranties contained in the Loan Documents are
true and correct on and as of the date hereof and are incorporated herein by
reference and hereby remade; (b) after giving effect to the amendments set forth
herein, no Default or Event of Default has occurred and is continuing; and (c)
the Borrower is legally and validly indebted to the Bank under the Loan
Documents as of February 27, 2001 in the principal amount of $4,533,023.78, plus
interest accrued and accruing thereon, and the Borrower does not have any
defense, offset, counterclaim or independent claim or cause of action against
the Bank with respect thereto or otherwise.

      2. The Agreement is hereby amended as follows:

            (a) The definition of Borrowing Base is hereby deleted in its
      entirety and replaced with the following:

                  Borrowing Base.  At the relevant time of reference
            thereto, the lesser of:

                  (a) the sum of (x) an amount determined by the Bank by
            reference to the most recent Borrowing Base Certificate delivered to
            the Bank pursuant to Section 7.4(c) to be equal to the sum of (i)
            85% of the Base Accounts, plus (ii) the lesser of (A) the Inventory
            Borrowing Base Percentage of the Base Inventory, or (B) the Maximum
            Inventory Component, plus (y) (i) during the period between March 1,
            2001 and August 31, 2001, $1,500,000, and (ii) after August 31,
            2001, zero, and
<PAGE>   2
                                      -2-

                  (b) (i) prior to the first anniversary of the Closing Date,
            $10,000,000, and (ii) on and after the first anniversary of the
            Closing Date, $12,000,000. Notwithstanding the foregoing, the amount
            set forth in clause (b)(i) of this definition shall be deemed to be
            $12,000,000 during such times prior to the first anniversary of the
            Closing Date as the Account/Inventory Ratio Condition is satisfied.

            (b) Section 9.2 of the Agreement is hereby deleted in its entirety
      and replaced with the following:

            9.2 DEBT SERVICE COVERAGE RATIO. The Borrower will not permit the
      Debt Service Coverage Ratio to be less than:

            2.00 to 1.00 for the fiscal quarter ending September 30, 2001;

            2.25 to 1.00 for the six-month period ending December 31, 2001;

            2.25 to 1.00 for the nine-month period ending March 31, 2002; and

            2.25 to 1.00 for the twelve-month period ending at the end of any
      fiscal quarter ending thereafter.

            (c) Section 9.3 of the Agreement is hereby deleted in its entirety
      and replaced with the following:

            9.3 MINIMUM TANGIBLE NET WORTH. The Borrower will not permit its
      Consolidated Tangible Net Worth to be less at the end of any fiscal
      quarter than the sum of (a) the Base Amount applicable to such quarter
      plus (b) the sum of the Net Income Additions to Net Worth for each fiscal
      year commencing after December 31, 2001.

      For the purposes of this Section 9.3, "Base Amount" means:

<TABLE>
<CAPTION>
      PERIOD                                                BASE AMOUNT
      ------                                                -----------
 <S>                                                        <C>
      Quarter ending March 31, 2001                         $11,750,000

      Quarter ending June 30, 2001                          $10,750,000

      Quarter ending September 30, 2001                     $11,750,000

      Quarters ending December 31, 2001
      and thereafter                                        $12,250,000
</TABLE>

      For the purposes of this Section 9.3, "Net Income Additions to Net Worth"
      means, with respect to any fiscal year of the Borrower, 50% of the result
      of (i) Consolidated Net Income of the Borrower for such fiscal year, minus
      (ii) the amount of Distributions to shareholders distributed in cash as
      dividends upon the Series B Preferred Stock of the Borrower, provided,
      that not more than $280,000 may be deducted under this clause (ii) with
      respect to Distributions made in any single fiscal year; further provided,
      that if
<PAGE>   3
                                      -3-

      the Borrower does not have positive Consolidated Net Income with respect
      to a fiscal year, then the Net Income Additions to Net Worth with respect
      to such fiscal year shall be zero.

      3. The Borrower acknowledges and affirms that all indebtedness,
liabilities and obligations of the Borrower to the Bank, including without
limitation, the Loan as modified herein, shall continue to be secured by a first
lien on and security interest in the Collateral.

      4. The Borrower will pay to the Bank (a) on the date hereof a
non-refundable commitment fee of $22,500, and (b) the Bank's legal fees and
disbursements of $855 incurred through the date hereof in connection with the
negotiation and preparation of this agreement and related matters.

      5. This agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut (without giving effect to the conflict of
laws principles thereof), and this agreement may not be amended except by a
writing signed by the Borrower and the Bank. This agreement may be executed in
any number of counterparts, but all such counterparts shall together constitute
but one instrument. In making proof of this agreement it shall not be necessary
to produce or account for more than one counterpart signed by each party hereto
by and against which enforcement hereof is sought. A facsimile of an executed
counterpart shall have the same effect as the original executed counterpart.

      Please confirm that the foregoing sets forth all of the amendments to the
Agreement and the entire agreement between the Borrower and the Bank with
respect to the matters set forth herein by signing and returning this letter to
the attention of the undersigned together with the amounts set forth in Section
4 above. You should retain a copy of this letter for your records. Until such
time as a fully executed original of this letter is received by the undersigned
together with the amounts set forth in Section 4 above, the agreements herein
shall be of no force or effect. Except as expressly amended herein, the
Agreement and the other Loan Documents will continue in full force and effect in
accordance with their respective terms.

                                    Very truly yours,

                                    WEBSTER BANK

                                    By: /s/ Charles C. Thomas
                                        ---------------------------------------
                                        Charles C. Thomas
                                        Its Vice President
<PAGE>   4
                                      -4-

Reviewed and Agreed to:

TRANSACT TECHNOLOGIES INCORPORATED

By: /s/ Richard L. Cote
    ----------------------------------
      Richard L. Cote
      Its Executive Vice President
            and Chief Financial OfficerEMPLOYMENT AGREEMENT

               Agreement,   dated  as  of  January  1,  2001,   between  BALCHEM
CORPORATION, a Maryland corporation ("Company") and DINO A. ROSSI ("Employee").

               In consideration  of the agreements  contained below, the parties
agree as follows:

               1.  Company  shall  employ  Employee as its  President  and Chief
Executive  Officer for a term (the "Term")  commencing as of the date hereof and
terminating   December  31,  2001,  provided  that  the  Term  shall  be  deemed
automatically  extended for  successive one (1) year periods (each an "Extension
Period")  ending on each  successive  anniversary  of December 31, 2001,  unless
either party hereto gives  written  notice to the other not less than sixty (60)
days prior to the end of such initial term or the then current  Extension Period
that the Term is to terminate effective as of the end of such initial term or of
such then current Extension Period, as the case may be, in all events subject to
earlier termination in accordance with the provisions of this Agreement.

               2.  Throughout  the Term,  the Board of Directors of Company (the
"Board")  shall,  consistent  with its  fiduciary  duty,  cause  Employee  to be
nominated (and recommended by the Board) for election as a director of Company.

               3.  During the Term,  Employee  shall  devote all of his  working
time,  attention  and effort to the  performance  of his duties for Company.  4.
During the Term,  Employee  shall  receive a salary at the rate of $194,700  per
annum, which salary may be increased,  at a minimum annually,  but not decreased
during the Term, at the instance of the Board.

               5. In addition to his annual salary as aforesaid,  Employee shall
be entitled to annual  discretionary  bonuses  based on a target figure of up to
100% (as  determined  by the Board or an  authorized  committee  thereof) of his
annual salary,  and consistent  with operating  and/or other  financial  targets
established by the Board or an authorized committee thereof, for each respective
fiscal year of Company during the Term.

               6.  Employee  shall be entitled to four weeks paid  vacation  per
calendar year or such greater  amount as may be provided  under  Company's  then
prevailing vacation policy as in effect from time to time. All vacation shall be
scheduled so as not to interfere with Company's operations.

               7.  Employee  shall  be  entitled  during  the Term to all of the
fringe  benefits  from  time  to  time  afforded  by  Company  generally  to its
executives, as well as:

                   (1) Use of a leased  company car (generally  consistent  with
that provided to comparable  executive  officers in Company's industry regarding
model, year and reimbursement for related expenses).

<PAGE>

                   (2) The sum of $2,500 per annum, to be applied by Employee to
the premium cost of term life insurance and disability insurance (in addition to
such group life  insurance  and  disability  insurance as may be made  available
generally to Company's executives) for the benefit of such person(s) as Employee
may designate from time to time.

               8.  In  the  event  Employee's   employment  with  Company  shall
terminate for any reason,  then, in addition to any entitlements under Section 9
or Section 10 hereof, if then applicable thereto,  Employee shall be entitled to
receive any accrued but unpaid  salary to the date of such  termination  and any
unpaid  annual  bonus  which  Employee  shall  have  earned  in  respect  of any
theretofore completed fiscal year of Company.

               9. In the event (x) Company  shall  terminate  the  employment of
Employee  under this  Agreement for any reason other than (i) "Cause" (as herein
defined), (ii) Employee's death, or (iii) by reason of notice from Employee that
Employee  intends  to  terminate  his  employment  with  Company,  whether  such
termination  by Company is pursuant to a notice given under Section 1 above,  or
whether such termination shall otherwise occur upon the expiration of, or at any
time during,  the Term, or (y) Executive  shall  terminate his  employment  with
Company  within  twelve (12) months after  Executive  shall have been demoted by
Company from his position as President and Chief Executive Officer of Company or
shall  otherwise  have  suffered  by reason  of  Company's  intentional  actions
regarding the terms and nature of his  employment  such a fundamental  change in
his  employment  with  Company  as  to  effectively  amount  to a  "constructive
termination"  of his  employment  with  Company (but shall not in fact have been
discharged from such employment):

                      (1) Company shall pay to Employee,  and Employee  shall be
entitled to receive as his sole and exclusive  remedy and compensation by reason
of or arising out of such  termination,  in addition to the amounts specified in
Section 8 hereof, an amount (the "Severance Amount") equal to 150% of Employee's
then current annual salary at the time of such termination. The Severance Amount
shall be due and payable to Employee in twelve (12) equal  monthly  installments
commencing  the  tenth  day of the  month  immediately  after  the month of such
termination.

                      (2) As of the  effective  date  of such  termination,  all
options to purchase shares of common stock of the Company theretofore granted to
Employee but not yet vested shall be deemed vested and  accordingly  immediately
exercisable  in  full  (to the  extent  not  theretofore  exercised)  and  shall
thereupon be exercisable in accordance with and so long as is provided under the
respective terms and conditions of such options.

               10.  (a) In the  event a  Change  of  Control  Event  (as  herein
defined) shall occur during the Term,  then, if Company (or any other  successor
thereto for which Employee shall  thereupon  become  employed)  shall  terminate
Employee's  employment  with Company (or such  successor) for any reason,  other
than (i) for Cause,  (ii)  Employee's  death,  or (iii) by reason of notice from
Employee of Employee's  intention to terminate his  employment  with Company (or
such successor),  in each case prior to the second anniversary of such Change of
Control  Event,  then Company  shall pay to Employee,  in lieu of the  Severance
Amount  provided  for in Section  9(a)  hereof,  but in  addition to the amounts
specified  in  Section  8 hereof  (and in any event  subject  to  Section  10(d)
hereof), an amount (the "Involuntary  Change of Control Amount"),  equal to 200%
of the sum of (x)  Employee's  then  current  annual  salary plus (y) the annual
bonus  earned by Employee  in respect of the fiscal year of Company  immediately

<PAGE>
prior to the fiscal  year in which such  Change of Control  Event  occurs.  Such
Involuntary Change of Control Amount shall be due and payable to Employee in one
lump sum within ninety (90) days after such termination.

                    (b) In the  event a Change of  Control  Event  shall  occur,
then,  if Employee  elects to  terminate  his  employment  with  Company (or the
successor  thereto for which Employee shall thereupon  become employed) prior to
the second  anniversary of such Change of Control Event,  then Company shall pay
to Employee (and in any event subject to Section 10(d)  hereof),  an amount (the
"Voluntary  Change of Control  Amount") equal to 100% of Employee's then current
annual salary.  Such Voluntary Change of Control Amount shall be due and payable
to Employee in 12 equal monthly installments  commencing on the tenth day of the
month immediately after the month in which the Change of Control Event occurs.

                    (c) For purposes of this Agreement:

                        (1) "Change of Control  Event" means the  occurrence  of
any of the following events during the Term:

                            (1) any  "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the  Securities  Exchange Act of 1934, as amended
(the  "Exchange  Act"),  is or becomes  (including by merger,  consolidation  or
otherwise)  the  "beneficial  owner"  (as  defined  in  Rules  13d-3  and  13d-5
promulgated  under the Exchange Act,  directly or indirectly,  of 50% or more of
the voting power of the total outstanding Voting Stock of Company;

                            (2)  during  any  period of two  consecutive  years,
individuals who at the beginning of such period  constituted the Board (together
with any new directors  whose  election to the Board,  or whose  nomination  for
election by the  stockholders  of the Company,  was approved by a vote of 75% of
the directors then still in office who were either directors at the beginning of
such period or whose  election or  nomination  for  election was  previously  so
approved) cease to constitute a majority of the Board then in office; or
<PAGE>

                            (3) the sale or other disposition (other than by way
of merger or  consolidation) of all or substantially all of the capital stock or
assets of Company to any Person or group (as  defined in Rule 13d-5  promulgated
under the Exchange  Act) as an entirety or  substantially  as an entirety in one
transaction or a series of related transactions, unless the ultimate "beneficial
owners" of the Voting Stock of such Person  immediately  after giving  effect to
such transaction own, directly or indirectly,  more than 80% of the total voting
power of the total outstanding Voting Stock of Company immediately prior to such
transaction.

                        (i)   "Person"   means  any   individual,   corporation,
partnership, joint venture, limited liability company, trust, or other entity.

                        (2) "Voting Stock" of a person means capital stock of or
equity  interests  in such Person of the class or classes  pursuant to which the
holders  thereof have the general voting power under ordinary  circumstances  to
elect  at  least  a  majority  of the  board  of  directors,  managers,  general
partner(s)  or trustees of such  Person  (irrespective  of whether or not at the
time stock or equity interests of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
<PAGE>

                    (d)  Notwithstanding  anything  in  this  Agreement  to  the
contrary,  in no event will any amount which otherwise would be payable under or
pursuant to this  Agreement  be payable to  Employee to the extent such  amount,
together with all other amounts payable and benefits  provided to Employee under
or pursuant to this Agreement and/or under any other plan(s),  agreements and/or
arrangement(s)  arising out of Employee's  employment  relationship with Company
and/or  any  direct  or  indirect   subsidiary  of  Company  (including  without
limitation any such amounts  payable by any affiliate of Company or any acquirer
of any of the stock or assets of Company or any affiliate of such acquirer),  if
paid to  Employee,  would  result in  Employee  receiving  an "excess  parachute
payment" for purposes of Section 280G of the Internal  Revenue Code of 1986,  as
amended.  The  determination  of  whether a payment  under or  pursuant  to this
Agreement would result in Employee  receiving an excess  parachute  payment (but
for the  provisions of this Section  10(d)) shall be made by counsel for Company
reasonably  selected by Company,  after consultation with Company's  independent
auditor.

               11. (a) It is expressly  understood that,  solely for purposes of
this Section 11, in the event  Employee's  employment with Company is terminated
for Cause,  or by reason of notice from  Employee of his  intention to terminate
his employment  with Company,  or if Employee  terminates  his  employment  with
Company prior to the then  scheduled  last day of the Term (before giving effect
to such termination), then the Term shall be deemed to end on its then scheduled
last  day  (before  giving  effect  to any  such  termination  or  any  possible
subsequent  Extension Period). If, on the other hand,  Employee's  employment is
terminated by Company for any reason other than (i) for Cause, or (ii) by reason
of notice from  Employee of his  intention  to  terminate  his  employment  with
Company,  then, for purposes of this Section 11, the Term shall be deemed to end
on the effective date of such termination.

                   (b) During the Term (as determined  pursuant to Section 11(a)
above), and for one year thereafter, Employee, shall not:

                            (1) directly or  indirectly  own,  manage,  operate,
join,  control,  or  participate  in the ownership,  management,  operation,  or
control of, or make any financial  investment  in, or become  employed by, or be
connected in any manner with, or render  (whether or not for  compensation)  any
consulting,  advisory or other services to or for the benefit of, any Person, or
otherwise  engage in any  business or  activity,  which  directly or  indirectly
competes with any business  conducted by Company and or any of its subsidiaries;
provided,  however,  that it shall  not be a  violation  of this  Agreement  for
Employee to have beneficial  ownership of less than 1% of the outstanding amount
of any class of securities listed on a national securities exchange or quoted on
an inter-dealer quotation system;

                            (2) directly or indirectly  solicit,  in competition
with  Company  and/or  any of its  subsidiaries,  any  Person who is a client or
customer of any business conducted by Company and/or any of its subsidiaries; or

                            (3)  directly  or  indirectly  induce or  attempt to
induce any employee of Company and/or any of its  subsidiaries  to terminate his
or her employment for any purpose,  including,  without limitation,  in order to
enter into employment with any Person which competes with any business conducted
by Company and/or any of its subsidiaries.
<PAGE>

Notwithstanding the foregoing, it is understood and agreed that in the event any
entity shall acquire  control of Company or shall become a successor to Company,
the provisions of this Section 11(b) shall not apply to any business or activity
conducted by such entity or any of its subsidiaries  which is not  substantially
similar to any of the business(es) or activities conducted by any of Company and
its subsidiaries.

               12.  Employee  acknowledges  that in the course of his employment
with Company,  he will have acquired  information  concerning Company and/or its
subsidiaries which is not publicly  available,  including  non-public  financial
information and trade secrets ("Proprietary  Information").  At all times during
his  employment  and after his  employment  terminates,  Employee will keep such
Proprietary  Information  confidential and will not make use of such Proprietary
Information on his own behalf,  or on behalf of any Person,  without the express
prior  written  consent  from  Company  (which may be withheld  for any reason),
unless such  information  shall have become public knowledge other than by being
divulged or made accessible by him in breach of this provision or any obligation
or  fiduciary  duty to Company or any of its  subsidiaries;  provided  that such
confidentially  obligation shall not prohibit disclosure of information required
pursuant to governmental or judicial process or procedure.

               13. Employee acknowledges that as CEO and President of Company he
has been  placed in a position  of  confidence  and trust with the  clients  and
employees of Company,  and that, in connection with such services to Company, he
has had and will have access to confidential  information  vital to the business
of Company and/or one or more of its subsidiaries. Employee further acknowledges
that,  in view of the  nature  of the  business  in  which  Company  and/or  its
subsidiaries  is  engaged,  the  covenants  in  Sections  11 and 12  hereof  are
reasonable and necessary in order to protect the legitimate interests of Company
and that violation of any thereof would result in irreparable injury to Company.
Accordingly,  Employee  consents and agrees that, if he violates or threatens to
violate  any of such  provisions,  Company  shall be entitled to obtain from any
court  of  competent  jurisdiction,  without  the  posting  of any bond or other
security, preliminary and permanent injunctive relief, as well as damages and an
equitable  accounting of all earnings,  profits and other benefits  arising from
such  violation,  which rights shall be cumulative  and in addition to any other
rights or remedies in law or equity to which Company may be entitled.

               14. Employee acknowledges that: (i) the enforcement of any of the
provisions of any of Sections 11, 12 and 13 hereof (the "Restrictive Covenants")
against Employee would not impose any undue burden upon Employee;  and (ii) none
of the  Restrictive  Covenants  is  unreasonable  as to duration  or scope.  If,
notwithstanding the foregoing, any provision hereof would be held to be invalid,
prohibited  or  unenforceable  in any  jurisdiction  for any reason  (including,
without limitation, any provision which may be held unenforceable because of the
scope, duration or area of its applicability),  unless narrowed by construction,
such provision shall, as to such jurisdiction,  be construed as if such invalid,
prohibited or unenforceable  provision had been more narrowly drawn so as not to
be  invalid,  prohibited  or  unenforceable  (and  the  court  making  any  such
determination  as to any  provision  shall have the power to modify  such scope,
duration or area or all of them, and such provision  shall then be applicable in
such  modified  form  in  such  jurisdiction  only).  If,   notwithstanding  the
foregoing,  any  provision  hereof  would be held to be invalid,  prohibited  or
unenforceable  in any jurisdiction  for any reason,  such provision,  as to such
jurisdiction, shall be ineffective to the extent of such invalidity, prohibition
or  unenforceability,  without  invalidating  the  remaining  provisions of this
Agreement,  or affecting the validity or enforceability of such provision in any
other jurisdiction.
<PAGE>

               15. (a) Company shall be entitled to terminate the  employment of
Employee under this Agreement for Cause at any time during the Term.  "Cause" as
used herein shall mean the following:

                        (1) Habitual absence or lateness;

                        (2) Gross insubordination;

                        (3)  Failure to observe the  provisions  of Section 3 of
this Agreement concerning the devotion of full time to Company's business;

                        (4)  Failure  to comply  with any of the  provisions  of
Section 11 or 12 hereof;

                        (5) Any action  which  constitutes  a  violation  of any
applicable criminal statute; or

                        (6) Any act which  frustrates  or violates the undivided
duty of loyalty owed by Employee to Company.

                    (b)  Company   shall  also  be  entitled  to  terminate  the
employment of Employee under this Agreement for any reason other than for Cause,
in which case the  provisions  of  Section  8, and of  Section 9 or Section  10,
hereof shall, to the extent provided therein, be applicable.

                    (c) In the  event of a Change  of  Control  Event,  Employee
shall be entitled to terminate his  employment  with Company prior to the second
anniversary  of such Change of Control Event and in such event the provisions of
Section 8 and of Section 10 hereof shall, to the extent provided therein, apply.

                    (d) Upon any  termination  pursuant  to this  Section  15 of
Employee's employment with Company, the Term shall be deemed to end concurrently
with the  effectiveness  of such  termination,  except as otherwise  provided in
Section 11(a) hereof.

               16.  Employee may not assign or transfer this Agreement or any of
his rights, duties or obligations  hereunder.  Company may assign this Agreement
to any Person acquiring all or substantially all of Company's assets (by merger,
sale  of  assets  or  otherwise)  so  long  as  such  Person  assumes  Company's
obligations hereunder.

               17. This  Agreement  sets forth the entire  understanding  of the
parties, and supersedes any and all prior agreements,  oral or written, relating
to Employee's  employment by Company or the termination thereof.  This Agreement
may not be  modified  except  by a  writing,  signed by  Employee  and by a duly
authorized officer or director of Company.  This Agreement shall be binding upon
and shall inure to the benefit of Employee's heirs and personal representatives,
and the successors and assigns of Company.

               18. This  Agreement may be executed in more than one  counterpart
which, when taken together, shall constitute one complete, executed Agreement.
<PAGE>

                        Executed as of the day and year first above written.

                                                     BALCHEM CORPORATION

                                                     By: /s/ Kenneth Mitchell
                                                         --------------------
                                                         Kenneth Mitchell

                                                         /s/ Dino A. Rossi
                                                         ------------------
                                                         Dino A. Rossi

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