<PAGE>

                                                                   EXHIBIT 10.26
                                                                 [PNC BANK LOGO]

November 8, 1999



Richard J. DePiano
Chairman and Chief Executive Officer
Escalon Medical Corp.
351 E. Conestoga Road
Wayne, PA  19087

Fax:      610-688-3641
Phone:    610-688-6830

Subject:  CONFIRMATION OF RATE CAP TRANSACTION DATED AS OF NOVEMBER 8, 1999
          BETWEEN ESCALON MEDICAL CORP. ("ESCALON") AND PNC BANK, NATIONAL
          ASSOCIATION ("PNC").

Dear Rich:

The purpose of this letter agreement is to confirm the terms and conditions of
the Rate Cap Transaction (the "Transaction") entered into between Escalon and
PNC on the Trade Date specified below.  This letter constitutes a
"Confirmation" as referred to in the ISDA Master Agreement (the "Master
Agreement") specified below.

1.   The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.

2.   If Escalon and PNC are parties to an ISDA Master Agreement that sets forth
the general terms and conditions applicable to transactions between Escalon and
PNC (a "Master Agreement"), this Confirmation supplements, forms a part of, and
is subject to, such Master Agreement. If Escalon and PNC are not yet parties to
a Master Agreement, this Confirmation will supplement, form a part of, and be
subject to, a Master Agreement upon its execution by Escalon and PNC. All
provisions contained or incorporated by reference in such Master Agreement
shall govern this Confirmation, except as modified expressly below. In
addition, if a Master Agreement has not been executed, this Confirmation will
itself evidence a complete binding agreement between Escalon and PNC as to the
terms and conditions of the Transaction to which this Confirmation relates.

3.   Each party represents and warrants to agrees with the other party as
follows:

     (a) Such party is fully informed of and capable of evaluating, and has
     evaluated, the potential financial benefits and risks, the tax and
     accounting implications, the appropriateness in light of its


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                                                                November 8, 1999
                                                                          Page 2

     individual financial circumstances, business affairs, and risk management
     capabilities, and the conformity to its policies and objectives, of this
     Transaction.

     (b) Such party has entered into this Transaction in reliance only upon its
     own judgment. Neither party holds itself out as advising, or any of its
     employees or agents as having the authority to advise, the other party as
     to whether or not it should enter into this Transaction, and neither party
     shall have any liability whatsoever in respect of any advice of such nature
     given, or views expressed, by it or any such persons to the other party,
     whether or not such advice is given or such views are expressed at the
     request of the other party.

     (c) Such party has entered into this Transaction for purposes of hedging
     and not for the purpose of speculation.

4.   The terms of the particular Transaction to which this Confirmation relates
     are as follows:

Type of Transaction:          Rate Cap Transaction

Notional Amount:              Initially USD $7,000,000, then amortizing per the
                              attached amortization schedule

Trade Date:                   November 8, 1999

Effective Date:               November 22, 1999

Termination Date:             January 1, 2003, subject to adjustment in
                              accordance with the Modified Following Banking Day
                              Convention.

FIXED RATE PAYER:             For purposes of this Rate Cap Transaction, there
                              shall be no Fixed Rate Payer.

FLOATING RATE PAYER:          PNC

Cap Rate:                     9.00% for the period 11/22/1999 to 1/1/2001
                              9.50% for the period 1/1/2001 to 1/1/2002
                              10.00% for the period 1/1/2002 to 1/1/2003


Floating Rate Option:         USD-Prime-H.15

Designated Maturity:          One (1) month

Floating Rate Day Count
Fraction:                     Actual/360

Floating Rate for
Initial Calculation Period:   To be determined


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                                                                November 8, 1999
                                                                          Page 3


Reset Dates:                  Daily

Averaging:                    Weighted

Floating Rate Payer
Payment Dates:                The 1st day of each month, commencing on
                              December 1, 1999, and ending on January 1,
                              2003, subject to adjustment in accordance
                              with the Modified Following Banking Day
                              convention.

Payment to PNC:               Escalon will pay PNC a fee of USD $88,900.00
                              no later than November 10, 1999.

Payment Instructions to PNC:  PNC Bank, Pittsburgh
                              ABA#: 043-000-096
                              Acct: Investment Operations
                              Acct #: 196030411
                              Attn: Derivative Products

Payments to Escalon shall be made in immediately available funds to:

                                [PLEASE ADVISE]

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation, returning a copy to Sue Navadauskas
via fax (412/762-8667) and returning the original to Sue Navadauskas at One PNC
Plaza - 9th Floor, 249 Fifth Avenue, Pittsburgh, PA 15222 via Overnight
delivery. Sue's phone number is (412/762-2697).



Yours sincerely,                        Accepted and agreed as of the
                                        date first above written:

PNC BANK, NATIONAL ASSOCIATION          ESCALON MEDICAL CORP.

By: /s/ Charlotte B. McLaughlin         By: /s/ Richard J. DePiano
    ---------------------------             ------------------------
Name: Charlotte B. McLaughlin           Name: Richard J. DePiano

Title: Senior Vice President            Title: Chairman and Chief Executive
                                               Officer

<PAGE>

PNC BANK, N.A. CONFIDENTIAL




AMORTIZATION SCHEDULE




<Table>
<Caption>
  Payment        Payment
Start Date*     Due Date*      Principal Amount      Principal Prints
-----------     ---------      ----------------      ----------------
<S>             <C>              <C>                   <C>
11/22/99         4/1/00           $7,000,000.00         $  350,000.00
  4/1/00         7/1/00           $6,650,000.00         $  350,000.00
  7/1/00        10/1/00           $6,300,000.00         $  350,000.00
 10/1/00         1/1/00           $5,850,000.00         $  350,000.00
---------------------------------------------------------------------
  1/1/01         4/1/01           $5,600,000.00         $  350,000.00
  4/1/01         7/1/01           $5,250,000.00         $  350,000.00
  7/1/01        10/1/01           $4,900,000.00         $  350,000.00
 10/1/01         1/1/02           $4,550,000.00         $  350,000.00
---------------------------------------------------------------------
  1/1/02         4/1/02           $4,200,000.00         $  350,000.00
  4/1/02         7/1/02           $3,850,000.00         $  350,000.00
  7/1/02        10/1/02           $3,500,000.00         $  350,000.00
 10/1/02         1/1/03           $3,150,000.00         $3,150,000.00
</Table>



*Start and Payment Due Dates are subject to the Modified Following Business Day
convention.