EXHIBIT 10.4


                         TAX INDEMNIFICATION AGREEMENT

         THIS  TAX  INDEMNIFICATION  AGREEMENT  (the  "Agreement")  is made  and
entered into as of this 19th day of October,  1995, by and between Optical Cable
Corporation,  a Virginia corporation (the "Company"),  and Robert Kopstein,  the
current sole shareholder of the Company (the "Shareholder"),  to be effective as
of the date of the  closing of the  initial  public  offering  of the  Company's
common stock (the "Closing  Date")  pursuant to the  Registration  Statement No.
33-96476 on Form S-1 filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended.


                                  INTRODUCTION


         The Company elected to be taxed as an S Corporation pursuant to Section
1362 of the Internal Revenue Code of 1986, as amended (the "Code"),  on November
1,  1987,  and will be an S  Corporation  until the day before the date on which
such  status  terminates  pursuant to Code  Section  1362(d)  (the  "Termination
Date"). Accordingly, for the period from November 1, 1987, until the Termination
Date (the "S Corporation  Period"),  the Company  incurred no federal income tax
liability and no state income tax liability in those states where the S election
was in force.  Rather,  the Company's items of income,  loss and deductions were
passed  through to the  Shareholder.  As a result of the public  offering of the
Company's  stock on the Closing Date,  the Company will no longer be eligible to
be  treated as an S  Corporation  for  federal  and state  income tax  purposes.
Therefore,  the Company  will elect within one week prior to the Closing Date to
terminate its status as an S Corporation

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pursuant  to  Code  Section  1362(d),  after  which  the  Company  will  be  a C
Corporation.  Accordingly,  the  parties to this  Agreement  desire to set forth
their  agreement  with respect to certain income taxes which may be imposed upon
the  Company  after  the  Termination  Date as a result  of the  conduct  of the
Company's business during the S Corporation Period.
The Company and the Shareholder agree to the following:

         1. Indemnification of Company.

         a.    In the event that any governmental  taxing authority,  including,
               without limitation, the Internal Revenue Service and any state or
               local taxing authority (a "Taxing Authority") in any jurisdiction
               in which an S  election  was made or  deemed to have been made by
               operation  of  law,  adjusts,  for  any  reason  whatsoever,  the
               Company's net income tax  liability,  tax credits or recapture of
               tax   credits   for  the  S   Corporation   Period  (a   "Company
               Adjustment"),  the Shareholder shall pay on demand to the Company
               a  contribution  to its capital  which equals (i) the  additional
               federal,  state and local income taxes  payable by the Company in
               connection  with, or as a result of, a Company  Adjustment,  plus
               (ii) the amount of any interest expense,  penalties and additions
               to tax payable by the Company in connection  with, or as a result
               of, a Company Adjustment,  plus (iii) the amount of all expenses,
               attorneys' fees and accountants'  fees incurred by the Company in
               connection  with, or as a result of, a Company  Adjustment,  less
               (iv) the amount of any  reductions  in tax payable by the Company
               in connection with, or as a result of, the Company  incurring any
               such additional federal, state and local income taxes, any such

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               interest expense, penalties and additions to tax  payable  by the
               Company, and any such expenses,  attorneys' fees and accountants'
               fees incurred by the Company.

         b.    To the extent that it is determined that a payment to the Company
               pursuant  to  Section  1(a)  is  taxable  to  the  Company,   the
               Shareholder  shall pay on demand to the Company an amount  which,
               after  reduction  for all  additional  federal,  state  and local
               income  taxes  payable by the  Company as a result of the payment
               made  under  this  Section  1(b),  equals  the  sum  of  (i)  the
               additional  federal,  state and local income taxes payable by the
               Company as a result of the payment pursuant to Section 1(a), plus
               (ii) the aggregate amount of any interest, penalties or additions
               to tax payable by the Company as a result of the  taxation of the
               payment pursuant to Section 1(a).

         c.    Notwithstanding  any provision in this Agreement to the contrary,
               the total liability of the Shareholder under this Agreement shall
               not exceed an amount  equal to the sum of all income tax  refunds
               and reductions to income tax otherwise currently payable received
               by the Shareholder (collectively, "Shareholder Refunds") from all
               Taxing  Authorities  attributable to the events causing a Company
               Adjustment,  decreased by any income tax liability incurred or to
               be incurred by the Shareholder attributable to the events causing
               a  Company  Adjustment.  If the  Shareholder  does not  receive a
               Shareholder Refund  attributable to a Company Adjustment then the
               Shareholder shall have no liability under this Agreement.

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         d.    The Company  shall make a demand for  payment on the  Shareholder
               only  upon  the  occurrence  of  both  (1) the  Company  becoming
               Obligated  to Pay (as defined in Section 3 the amounts  described
               in  Section  1(a)(i),  (ii),  (iii)  or  1(b)  and (2)  upon  the
               Shareholder's  receipt of a  Shareholder  Refund.  The  Company's
               demand  for  payment  shall  not  exceed  the sum of  Shareholder
               Refunds  actually  received by the Shareholder  prior to the time
               demand for payment is made, less the sum of any prior demands for
               payment made by the Company.

         e.    The  Shareholder  shall take such  reasonable  steps necessary to
               claim  Shareholder  Refunds  from any Taxing  Authority  that are
               attributable to the events causing a Company Adjustment.

         2. Contests; No Settlement.

         a.    The  Shareholder  shall be  required  to notify  the  Company  in
               writing  and  the  Company   shall  be  required  to  notify  the
               Shareholder  in  writing  of all  audits,  examinations  or other
               investigations  by any Taxing  Authority of the  Shareholder's or
               the  Company's  income taxes for tax periods  which include the S
               Corporation  Period.  Additionally,   the  Shareholder  shall  be
               required to notify the  Company in writing and the Company  shall
               be  required  to  notify  the   Shareholder  in  writing  of  any
               adjustments  proposed as a result of such audit,  examination  or
               other  investigation  to the extent any such proposed  adjustment
               may  constitute  or affect  any  Company  Adjustment  within  the
               contemplation  of this Agreement.  Any  notification  required by
               this Section 2(a) must be sent to

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               the  party to be notified within ten days  from the occurrence of
               the  event giving rise to the obligation to notify.

         b.    The Shareholder  may, upon written notice to the Company,  demand
               that the Company  contest any  Company  Adjustment  proposed by a
               Taxing Authority (including pursuing all remaining administrative
               proceedings and judicial  appeals).  Subject to the provisions of
               Section 1(c), the  Shareholder  shall pay to the Company,  on the
               Company's  demand, a contribution to its capital which equals (i)
               the amount of any interest  expense,  penalties  and additions to
               tax payable by the Company in connection with, or as a result of,
               contesting any proposed Company Adjustment,  plus (ii) all costs,
               damages and expenses (including attorneys' and accountants' fees)
               in connection  with, or as a result of,  contesting  any proposed
               Company  Adjustment,  less (iii) the amount of any  reductions in
               tax payable by the Company in connection with, or as a result of,
               the Company incurring any such costs,  damages and expenses,  and
               any such interest expense, penalties and additions to tax payable
               by the Company.

         c.    The Company shall not make,  accept or enter into a settlement or
               other  compromise  with  respect to any  Company  Adjustment,  or
               forego or terminate  any  administrative  proceeding  or judicial
               appeal involving any Company  Adjustment,  without the consent of
               the Shareholder which shall not be unreasonably withheld.

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         d.    The Shareholder shall not make, accept or enter into a settlement
               or other compromise with respect to a Shareholder Refund from any
               Taxing  Authority  attributable  to the events  causing a Company
               Adjustment, or an income tax liability incurred or to be incurred
               by the  Shareholder  attributable to the events causing a Company
               Adjustment,  or forego or terminate any administrative proceeding
               or  judicial  appeal  involving  any such  Shareholder  Refund or
               income tax  liability,  without the consent of the Company  which
               shall not be unreasonably withheld.

         3.  Determination of Obligation to Pay.

         a.    The Shareholder  shall be deemed Obligated to Pay for purposes of
               Section 1 upon the  earliest to occur of the  following:  (i) the
               date on which the parties agree to a Company Adjustment  proposed
               by a Taxing Authority;  (ii) the date on which the time to pursue
               an appeal of the proposed Company  Adjustment expires without the
               Shareholder  having requested a contest of the Company Adjustment
               pursuant to Section  2(b);  or (iii) the date on which payment is
               required  to be made in order to be able to litigate in the forum
               selected  for the  contest,  or in  order  to  avoid  some  other
               detrimental effect to the Company.

         4.  Cooperation.

         a.    Each party shall provide the other with such  cooperation  as may
               reasonably   be  requested  in   connection   with  any  contest,
               proceeding,  audit or appeal  relating  to any matter  concerning
               this Agreement,  including, without limitation,  making available
               all relevant books, records and all employees having knowledge of
               the matters concerned.

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         b.    The  Company  and the  Shareholder  shall  retain  all  books and
               records  pertaining  to any event which might relate to a Company
               Adjustment  until the  expiration  of the statute of  limitations
               applicable to a possible  adjustment,  audit or proceeding by any
               Taxing Authority relating to the S Corporation Period.

         5. Miscellaneous.

         a.    NOTICES. All notices,  requests, demands and other communications
               which are  required  or which may be given  under this  Agreement
               shall be in writing.
        
         b.    ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
               between the parties with respect to all  liabilities  between the
               Shareholder  and  the  Company  resulting  from  any  income  tax
               adjustments  by a Taxing  Authority for the S Corporation  Period
               and supersedes all prior agreements and understandings,  oral and
               written,  between the Shareholder and the Company relating to the
               subject matter of this Agreement.

         c.    BINDING EFFECT.  This Agreement shall inure to the benefit of and
               be  binding  upon the  Shareholder  and the  Company,  and  their
               respective successors and assigns.

         d.    AMENDMENTS. No provision of this Agreement may be amended, waived
               or otherwise  modified  without the prior written  consent of the
               Shareholder and the Company.

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         e.    GOVERNING LAW. This Agreement shall be governed by, and construed
               in accordance with, the laws of the Commonwealth of Virginia.

         f.    COUNTERPARTS.  This  Agreement  may be  executed by any number of
               counterparts, each of which shall be deemed to be an original and
               all of  which  together  shall be  deemed  to be one and the same
               instrument.

         g.    CONSTRUCTION  OF TERMS.  Nothing  expressed  or  implied  in this
               Agreement is intended,  or shall be construed,  to confer upon or
               give any person, firm or corporation, other than the Shareholder,
               the Company and their  respective  assigns  and  successors,  any
               rights or remedies under or by reason of this Agreement.

                                   OPTICAL CABLE CORPORATION



                                   BY:   /s/ Robert Kopstein
                                         ------------------------------------
                                            Robert Kopstein
                                            Chairman of the Board, President
                                            and Chief Executive Officer




                                        /s/ Robert Kopstein
                                        ____________________________________
                                            Robert Kopstein, Individual