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<SEC-DOCUMENT>0000916641-02-000139.txt : 20020414
<SEC-HEADER>0000916641-02-000139.hdr.sgml : 20020414
ACCESSION NUMBER:		0000916641-02-000139
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20011031
FILED AS OF DATE:		20020129

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			OPTICAL CABLE CORP
		CENTRAL INDEX KEY:			0001000230
		STANDARD INDUSTRIAL CLASSIFICATION:	DRAWING AND INSULATING NONFERROUS WIRE [3357]
		IRS NUMBER:				541237042
		STATE OF INCORPORATION:			VA
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-27022
		FILM NUMBER:		02521130

	BUSINESS ADDRESS:	
		STREET 1:		5290 CONCOURSE DR
		CITY:			ROANOKE
		STATE:			VA
		ZIP:			24019
		BUSINESS PHONE:		5402650690

	MAIL ADDRESS:	
		STREET 1:		5290 CONCOURSE DRIVE
		CITY:			ROANOKE
		STATE:			VA
		ZIP:			24019
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>FORM 10-K DATED 10/31/01
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2001        Commission file number 0-27022
- ------------------------------------------        ------------------------------

                            OPTICAL CABLE CORPORATION
                            -------------------------
             (Exact name of registrant as specified in its charter)

                         Virginia                     54-1237042
            (State or other jurisdiction of        (I.R.S. Employer
             incorporation or organization)       Identification No.)

              5290 Concourse Drive, Roanoke, VA            24019
           (Address of principal executive offices)      (Zip Code)

        Registrant's telephone number, including area code (540) 265-0690

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                            Name of Each Exchange on
                Title of Each Class            Which Registered
                -------------------            ----------------

            Common Stock, No Par Value    OTC (Nasdaq National Market)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

  (1)   Yes x       No                  (2)   Yes x       No
  -----------------------------------------------------------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

As of December 31, 2001, the last practicable date available with respect to
affiliate holdings, 37,486,249 shares of voting common stock, with a market
value of $61,102,585 were held by non-affiliates of the registrant.
<PAGE>

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.

                Class                       Outstanding at December 31, 2001
                -----                       --------------------------------

     COMMON STOCK, NO PAR VALUE                     55,431,279 SHARES

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Optical Cable Corporation Proxy Statement for the 2002 Annual
Meeting of Shareholders are incorporated by reference into Part III hereof.

                                        2
<PAGE>

                                     PART I

Item 1.  Business.
- ------------------

FORWARD-LOOKING INFORMATION

This report may contain certain "forward-looking" information within the meaning
of the federal securities laws. The forward-looking information may include,
among other information, statements concerning our outlook for the future,
statements of belief, future plans, strategies or anticipated events, and
similar information and statements concerning matters that are not historical
facts. The forward-looking information is subject to risks and uncertainties
that may cause actual events to differ materially from our expectations. Factors
that could cause or contribute to such differences include, but are not limited
to, the level of sales to key customers or distributors; the economic conditions
affecting network service providers; the slowdown in corporate spending on
information technology; actions by competitors; fluctuations in the price of raw
materials (including optical fiber); our dependence on a single manufacturing
facility; our ability to protect our proprietary manufacturing technology;
market conditions influencing prices or pricing; our dependence on a limited
number of suppliers; volume commitments made to certain of our suppliers; an
adverse outcome in litigation, claims and other actions, and potential
litigation, claims and other actions against us, including, but not limited to,
the shareholder litigation that has been filed and other claims related to
actions of our former Chairman, President and Chief Executive Officer; the
effect of sales of common stock by the various brokerage firms alleging that our
former Chairman, President and Chief Executive Officer pledged substantially all
of his personally-held unregistered shares of Optical Cable Corporation (the
"Company") to cover personal margin loans; technological changes and
introductions of new competing products; the current recession; terrorist
attacks or acts of war, particularly given the acts of terrorism against the
United States on September 11, 2001 and subsequent military responses by the
United States; ability to retain key personnel; changes in market demand;
exchange rates; productivity; weather; and market and economic conditions in the
areas of the world in which the Company operates and markets its products.

GENERAL

We are a leading manufacturer of a broad range of tight-buffered fiber optic
cables for the local area network and premise markets, often referred to as the
enterprise market. Our tight-buffered fiber optic cables are well-suited for use
in short to moderate distance applications to connect metropolitan, access and
enterprise networks. Our tight-buffered fiber optic cables are derived from
technology originally developed for military applications requiring rugged,
flexible and compact fiber optic cables. Our tight-buffered fiber optic cables
can be used both indoors and outdoors, are easy and economical to install,
provide a high degree of reliability and offer industry leading performance
characteristics. We have designed and implemented an efficient and automated
manufacturing process based on proprietary technologies. This enables us to
produce high quality indoor/outdoor tight-buffered fiber optic cable rapidly and
cost efficiently.

The Company was incorporated in 1983. The Company's executive offices are
located at 5290 Concourse Drive, Roanoke, Virginia 24019. The Company's
telephone number is (540) 265-0690.

INDUSTRY BACKGROUND

Increased Demand for Bandwidth

The number of communications networks and the quantity of information
transmitted over them have increased in recent years due to the growth of data
intensive applications, such as Internet access and e-commerce, e-mail, video
conferencing, multimedia file transfers, and the movement of large blocks of
stored data across networks. Despite the recent slowdown in such growth, we
believe that demand for bandwidth will increase over the long term.

Network service providers have focused on improving the transmission capacity,
or bandwidth, and performance of their networks to keep pace with the increase
in traffic. At the same time, the bandwidth of enterprise

                                       3
<PAGE>

networks continues to increase with innovations in networking equipment. These
improvements have resulted in additional bandwidth intensive applications,
further increasing the demand for bandwidth. We believe that these ongoing
improvements will continue to generate growth in data, video and voice
communications over networks.

Deployment of Optical Networks

To meet the demand for more bandwidth and better network performance, optical
networks are being deployed because they provide substantially higher data
transmission rates, significantly increased bandwidth and improved reliability.
Compared to copper wire, optical fiber has thousands of times the information
carrying capacity, occupies much less space and operates more reliably over
greater distances. Optical fiber is immune to the electromagnetic interference
that causes static in copper wire transmission, as well as to electrical surges.
Optical fiber is also a safer choice in environments where flammability is an
issue because it does not carry electricity. In addition, communications over
optical fiber networks are more secure than communications over copper wire
networks because tapping into fiber optic cable without detection is difficult.

Optical networks are comprised of a variety of networking equipment and
components required to transmit, process, change, amplify and receive light that
carries data, video and voice communications over fiber optic cables from one
location to another. Optical networks were originally deployed to serve the
needs of large network service providers to carry communications traffic over
long distances between cities and across continents. Improvements in performance
and reductions in the cost of optical networking equipment have made it
economically feasible to deploy optical networks in short to moderate distance
applications such as enterprise networks. To bring the bandwidth and performance
of optical networks to metropolitan markets and end-users, short to moderate
distance fiber optic cabling infrastructure must be deployed in cities and
enterprises and connected to the long-haul fiber optic infrastructure.

Optical fiber is deployed in four primary types of communications networks:
long-haul, enterprise, metropolitan and access.

    Long-haul Networks. Long-haul networks are long distance, inter-continental
    and inter-city communications systems that typically employ high fiber count
    fiber optic cables and advanced, expensive fiber optic networking equipment
    for the purpose of transmitting large quantities of data, video and voice
    communications over long distances. Until recently, this segment has
    historically experienced strong growth as network providers have sought to
    improve network infrastructure and support the increased demand for new
    services and greater traffic volumes. To date, the telecommunications
    industry has mainly focused on the build-out of the long-haul fiber optic
    infrastructure. This build-out has slowed substantially recently.

    Enterprise Networks. Enterprise networks, often referred to as local area
    networks or LANs, are communications systems used to transport data, video
    and voice communications within organizations such as businesses, government
    agencies and educational institutions. Enterprise networks connect computer
    users within an organization and allow users to share computer resources. As
    demand for bandwidth has increased, enterprise networks have increasingly
    utilized fiber optic technology. Optical fiber was first deployed in the
    major data routes or backbones of enterprise networks and is increasingly
    deployed to the end-user's desktop for high performance applications.

    Metropolitan Networks. Metropolitan networks are communications systems used
    to transport data, video and voice communications between major distribution
    points in metropolitan areas. These networks connect long-haul networks to
    access networks. They are generally rings of optical fiber that circle
    metropolitan areas, with branches of optical fiber that transmit information
    from the ring to co-location centers, data centers or other major
    distribution points located throughout the metropolitan area. These major
    distribution points are connected to access networks which in turn connect
    end-users to a communications network. Service providers, including
    telephone companies and cable television operators, continue to invest in
    the metropolitan fiber optic infrastructure to reduce capacity constraints
    resulting from the increase in data, video and voice

                                       4
<PAGE>

    communications and demand for enhanced services.

    Access Networks. Access networks are communications systems that connect
    metropolitan networks to end-users such as businesses, residences and
    governmental agencies. Historically, access networks have been built using
    copper wire systems due to significant cost advantages over competing
    technologies, including fiber optic networks. However, copper wire systems
    are becoming increasingly insufficient to meet end-users' demand for new
    services that require high bandwidth and fast transmission speeds.
    Therefore, fiber optic technology is being increasingly deployed in access
    networks. This has only recently become economically feasible due to
    technological improvements in information transmission technologies and
    significant cost reductions in optical networking equipment and components.
    We believe that additional technological improvements and equipment cost
    reductions will accelerate the deployment of optical fiber to the end-user.


Historically, the vast majority of optical fiber has been installed in long-haul
networks with the long-haul capacity exceeding current demand. Subject to the
recent economic slowdown and funds for expansion being available, we believe
that over the long term optical fiber installations in metropolitan, access and
enterprise networks will experience growth as a result of several factors. Among
those factors are the increasing demand for bandwidth by commercial and
residential end-users, improvements in information transmission technologies and
significant cost reductions in optical networking equipment and components. We
believe these technological improvements and cost reductions will require the
build-out of optical networks in the metropolitan, access and enterprise
markets.



Fiber Optic Cables

Optical fiber must be processed into fiber optic cables before it can be
installed in a fiber optic network. Fiber optic cables serve several purposes.
Fiber optic cable aggregates multiple strands of optical fiber into a single,
easy to handle package and protects the optical fiber from damage during
installation and from damage that can be caused by a wide variety of
environmental factors after installation. A typical fiber optic cable begins
with one or more optical fibers that are each coated with a very thin layer of
plastic material called a buffer. Groups of buffered optical fiber are further
protected by secondary buffers or grouped into plastic tubes that are stranded
together with aramid yarns, such as Kevlar(TM), which protect the optical fibers
from damage that can occur when the fiber optic cable is pulled and stretched
during installation. This combination of elements is then covered with one or
more layers of plastic or steel that serves as a protective outer jacket, to
make a fiber optic cable.



                                       5
<PAGE>

Fiber optic cable designs can be grouped into three primary categories: loose
tube, indoor tight-buffered, and indoor/outdoor tight-buffered.

    Loose Tube Fiber Optic Cable. A typical loose tube fiber optic cable
    consists of optical fibers that have a thin primary buffer coating and are
    grouped into one or more thin, rigid tubes that are flooded with gel to
    provide moisture protection to the optical fiber. The tubes are stranded
    around a strength element, such as a central strand of fiberglass or steel.
    This combination of elements is again flooded with gel and covered with one
    or more layers of plastic or steel that serves as a protective outer jacket,
    resulting in a loose tube fiber optic cable. A single loose tube fiber optic
    cable often contains many optical fibers, with groups of optical fibers
    contained in the individual tubes within the fiber optic cable. This type of
    fiber optic cable is relatively stiff and is primarily used for long,
    relatively straight outdoor runs, such as in long-haul networks and in parts
    of metropolitan networks. One major drawback to the typical design of loose
    tube fiber optic cable is that it is difficult to terminate. Termination is
    the point where the optical fiber is either connected to another optical
    fiber or to communications equipment. Termination of a loose tube fiber
    optic cable requires extensive cleaning of the gel filling and preparation
    of the fiber ends. This is a messy, time consuming and expensive process,
    which translates into higher installation costs. As a result, we believe
    loose tube fiber optic cables are generally less suitable for shorter
    distance applications and for applications that have a large number of
    termination points. Also, under various environmental conditions, loose tube
    fiber optic cables may experience problems with water penetration and
    chemical interaction of the gel with fiber buffers that can cause the
    optical fiber to become weak and brittle over time. Furthermore, most loose
    tube fiber optic cables are not suited for indoor use because they are
    flammable.

    Tight-Buffered (Indoor) Fiber Optic Cable. Tight-buffered fiber optic cable
    consists of optical fibers that have a primary buffer coating and an
    additional, heavier secondary tight buffer coating that is placed on each
    individual optical fiber for added protection. This combined buffer coating
    is typically three times thicker than the buffer used in loose tube fiber
    optic cables, providing much greater mechanical and environmental protection
    for each individual optical fiber. To form the fiber optic cable, groups of
    buffered optical fibers are combined with aramid yarn and sometimes other
    strength elements and covered with an outer protective jacket. Since these
    fiber optic cables are designed for indoor use, there is no need for gel or
    other fillings to protect against moisture. Tight-buffered fiber optic cable
    addresses many of the shortfalls presented by loose tube cable. It is
    significantly easier and faster to terminate because, without the messy gel,
    it requires no cleaning and little preparation. However, due to the amount
    of buffer material used in tight-buffered fiber optic cable, it can be too
    unwieldy and costly for long-haul, high fiber count applications.
    Furthermore, standard indoor tight-buffered fiber optic cable is not
    designed to withstand the additional environmental challenges presented by
    outdoor use.

    Tight-Buffered (Indoor/Outdoor) Fiber Optic Cable. In many fiber optic cable
    installations, loose tube fiber optic cables are terminated at building
    entrances and spliced to standard indoor tight-buffered fiber optic cable,
    which is run indoors. We believe this installation method is not optimal due
    to the considerable time and expense associated with these multiple
    terminations and the potential for ongoing fiber failures and optical signal
    loss at the termination points. The introduction of indoor/outdoor tight-
    buffered fiber optic cable alleviated these issues. Indoor/outdoor tight-
    buffered fiber optic cable enjoys all of the benefits of standard tight-
    buffered fiber optic cable, but its design, fabrication techniques and
    materials enable it to survive the range of conditions presented by outdoor
    installations. These same characteristics can make indoor/outdoor tight-
    buffered cable more rugged and survivable even in indoor only installations
    where, for example, there can be long pulling distances through conduits
    with a variety of bends and corners. Additional outdoor environmental
    challenges might include exposure to moisture, ultra-violet radiation and a
    variety of microorganisms, animals and insects.

    Indoor/outdoor tight-buffered fiber optic cable can be run directly into
    buildings without the need for costly and time-consuming transitions from
    loose tube fiber optic cable at building entrances. As a result, we believe
    indoor/outdoor tight-buffered fiber optic cable is ideal for use in short
    and moderate distance applications in metropolitan, access and enterprise
    networks which require a strong, flexible cable and have numerous
    termination points and subject to the recent economic slowdown and funds
    being available for expansion, such as in installations at universities,
    corporate campuses, industrial and office complexes, and in a variety of
    other applications where multiple buildings are interconnected. Due to the
    significant advantages in moderate distance applications with numerous
    termination points and subject to the recent economic slowdown and funds
    being available for expansion, we believe that the market for indoor/outdoor
    tight-buffered fiber optic cable is poised for growth as fiber optic
    technology is increasingly deployed in metropolitan and access networks.
    Additionally, indoor/outdoor tight-buffered fiber optic cable is also well
    suited and more survivable in enterprise installations.


                                       6
<PAGE>

OUR SOLUTION

     Focus on Indoor/Outdoor Tight-buffered Cable

     We manufacture and market a broad range of indoor/outdoor tight-buffered
     fiber optic cables for use in a variety of short to moderate distance
     applications which are designed to be rugged and more survivable.

     Fiber optic cables used for short to moderate distance applications may be
     subjected to many different stress environments. Cables installed inside
     buildings may be routed through cable trays, floor ducts, conduits and
     walls and may encounter sharp corners or edges. They may be pulled without
     lubricant, resulting in higher pull tensions, and stressed to the breaking
     point if care is not used. In the outdoor and underground environments,
     cables are often subjected to moisture, ultra-violet radiation and long
     pulling distances through conduits with a variety of bends and corners,
     resulting in high pulling tensions. These conditions can be aggravated if
     installers are not adequately trained in the installation of fiber optic
     cable. We recognized that, for many applications, the stresses on the
     cables during installation are similar to those in the military tactical
     environment, for which our technology was initially developed. We applied
     this technology to commercial products serving a market that could not be
     adequately served by loose-tube gel-filled cable or indoors only tight-
     buffered fiber optic cable.

     We believe our indoor/outdoor tight-buffered fiber optic cables provide
     significant advantages to distributors, installers, systems integrators and
     most importantly, end-users. We believe installers and systems integrators
     find that the multipurpose feature of our fiber optic cables can
     significantly reduce installation costs by eliminating the need to
     transition from outdoor fiber optic cable to indoor fiber optic cable at a
     building entrance. Our products also enhance network reliability by
     eliminating splices and reducing potential stress on optical fibers that
     could lead to breakage. We believe the simplified installation, lower cost
     and enhanced reliability of our products are valued by the end-user because
     a long lasting, trouble-free fiber optic cable minimizes down time and
     maximizes system availability.

     Technological Advantages

     As a result of our experience developing tight-buffered fiber optic cables,
     in particular to meet the stringent requirements for military applications,
     we believe we have a unique technology base that provides significant
     advantages in addressing the tight-buffered fiber optic cable market. We
     have developed considerable expertise in fiber optic cable design,
     manufacturing and production processes that enable us to produce high
     performance fiber optic cables cost effectively. Our indoor/outdoor tight-
     buffered fiber optic cables are designed to provide superior protection
     against exposure to the elements.

                                       7
<PAGE>

    Automated Manufacturing Capabilities

    We have designed and developed proprietary manufacturing software and
    hardware that provides us with automated and technically precise
    manufacturing capabilities. The automation of our manufacturing process has
    provided us with a number of important benefits. The most important benefit
    is that it allows us to produce high-quality fiber optic cable at a low
    cost. Another important benefit is that we are able to respond to customer
    requests for additional or unique products. Finally, many of our important
    technological advances result from our ability to modify and refine our
    production process.

    Customer Focus

    We focus on supporting our customers to enhance their business, and we work
    closely with our customers to identify and define their unique requirements.
    Sometimes this requires us to create custom fiber optic cables for a variety
    of special applications and environments. We have established close
    relationships with our customers. We believe these close relationships allow
    us to better understand our customers' specific needs, gives our customers
    an opportunity to understand how our products can uniquely satisfy their
    needs, and allow us to deliver more responsive solutions and support. By
    becoming involved early in our customers' network design process, we hope to
    have the opportunity to have our products specified as the fiber optic
    cables for the customer's network.

    Broad Product Offering

    We manufacture a broad, state-of-the-art line of tight-buffered fiber optic
    cables. We produce what we believe to be the industry's widest array of
    indoor/outdoor tight-buffered fiber optic cables with features and
    performance characteristics to address the needs of the metropolitan, access
    and enterprise markets. Our fiber optic cables range from small single fiber
    cables for patch cords to large high fiber count fiber optic cables for
    major network trunks and from fiber optic cables used in computer facilities
    to those used in underground installations. We also offer aerial self-
    supporting fiber optic cables for easy installation on pole lines, military
    tactical fiber optic cables, and specialty fiber optic cables for special
    markets. This wide range of products makes us attractive as a one-stop
    source for customers with unique as well as standard fiber optic cable
    requirements.

    Our Strategy

    Our objective is to be the leading manufacturer and supplier of
    indoor/outdoor tight-buffered fiber optic cables for metropolitan, access
    and enterprise networks. We intend to expand our business by providing fiber
    optic cables that are versatile, reliable, cost effective and responsive to
    evolving market requirements.


                                       8
<PAGE>


PRODUCTS

We manufacture and market a broad array of fiber optic cables that provide
high bandwidth transmission of data, video and voice communications over
short to moderate distances. Our product line is diverse and versatile, in
keeping with evolving application needs of customers within our markets. Our
tight-buffered fiber optic cables address the needs of the metropolitan,
access and enterprise networks.


The following summarizes the various types of fiber optic cables we produce and
their attributes:



    A-Series Assembly Fiber Optic Cables. Our A-Series fiber optic cables
    contain one or two optical fiber units. A-Series fiber optic cables contain
    tight-buffered optical fibers which are surrounded by a layer of Kevlar(TM)
    or other aramid yarn strength members to prevent the optical fiber from
    being stretched if there is tension on the fiber optic cable. A flexible and
    resilient thermoplastic outer jacket is then applied to further strengthen
    and protect the


                                       9
<PAGE>

    optical fiber. These fiber optic cables are used for jumpers, which are
    short length patch cords, and for pigtails, which are short lengths of fiber
    optic cable with a connector on one end. Various outer jacket materials are
    offered to provide flammability ratings and handling characteristics
    tailored to customers' needs. These fiber optic cables are often privately
    labeled and sold to original equipment manufacturers that produce the fiber
    optic cable assemblies.

    B-Series Breakout Fiber Optic Cables. Our B-Series fiber optic cables
    consist of a number of subcables, each consisting of a single optical fiber,
    Kevlar(TM) or other aramid yarn strength members and a subcable jacket.
    These subcables are tightbound in a pressure extruded, high performance
    Core-Locked(TM) PVC outer jacket to form the finished multifiber fiber optic
    cables. Like the A-Series fiber optic cables, the subcables are intended to
    be terminated directly with connectors. This direct termination feature
    makes this fiber optic cable type particularly well suited for shorter
    distance installations, where there are many terminations and termination
    costs are more significant. The materials and construction of the fiber
    optic cable permit its use both indoors and outdoors. These features make
    the fiber optic cables cost effective for use in campus and industrial
    complex installations and between and within buildings since there is no
    need to splice outdoor fiber optic cables to indoor fiber optic cables at
    the building entrance.

    D-Series Distribution Fiber Optic Cables. Our D-Series fiber optic cables
    are made with the same tight-buffered optical fiber as the B-Series fiber
    optic cables and with a high performance PVC outer jacket. Our D-Series
    fiber optic cables are also available with a Core-Locked jacket. Unlike the
    B-Series fiber optic cables, however, each tight-buffered optical fiber in a
    D-Series fiber optic cable is not covered with a separate subcable jacket.
    D-Series fiber optic cables are intended for longer distance applications,
    where termination considerations are less important and often traded off for
    size, weight and cost. The tight-buffered optical fiber and high performance
    PVC outer jacket make D-Series fiber optic cables rugged and survivable,
    with a small, lightweight configuration. They can also be armored for
    additional protection for use in buried and overhead installations. The high
    strength to weight ratio of these fiber optic cables makes them well suited
    for installations where long lengths of fiber optic cables must be pulled
    through duct systems. D-Series fiber optic cables are used in relatively
    longer length segments of installations, such as trunking, LAN and
    distribution applications, optical fiber in the loop, optical fiber to the
    curb and drop cables.

    G-Series Subgrouping Fiber Optic Cables. Our G-Series fiber optic cables
    combine a number of multifiber subcables, each similar to a D-Series fiber
    optic cable. Each multifiber subcable is tightbound with an elastomeric
    jacket, providing excellent mechanical and environmental performance. These
    subcables are contained in a pressure extruded, high performance Core-
    Locked(TM) PVC outer jacket to form the finished fiber optic cable. This
    design permits the construction of very high fiber count fiber optic cables.
    These fiber optic cables may be used where groups of optical fibers are
    routed to different locations. We have developed a subgroup fiber optic
    cable containing over 1,000 optical fibers intended for high density,
    moderate length routes such as urban telephone distribution systems.

    Other Fiber Optic Cable Types. We produce many variations on the basic fiber
    optic cable styles discussed above for more specialized installations. For
    outdoor applications, we can armor both the B-Series and D-Series fiber
    optic cables with corrugated steel tape for further protection in
    underground or overhead installations. For overhead installations on utility
    poles, we offer several self-supporting versions of the D-Series fiber optic
    cables, with higher performance outer jackets. Our fiber optic cables are
    available in several flammability ratings, including plenum for use in
    moving air spaces in buildings, and riser for less critical flame-retardant
    requirements. Zero halogen versions of the B-Series and D-Series fiber optic
    cables are available for use in enclosed spaces where there is concern over
    release of toxic gases during fire. We offer composite fiber optic cables
    combining optical fiber and copper wires to facilitate the transition from
    copper wire to optical fiber-based systems without further installation of
    fiber optic cables. We also offer specialty fiber optic cables, including
    military tactical and mining fiber optic cables.

CUSTOMERS

We have a global customer base, including distributors, original equipment
manufacturers, system integrators, electrical contractors, value added resellers
and end-users. The following is a list of representative types of end-users of
our fiber optic cables:

                                       10
<PAGE>

o    Cable Television System Operators. Cable television system operators
continue to upgrade their networks to add optical fiber to their networks.
Similar to other build-outs in the access network, we are supplying lower fiber
count, moderate distance fiber optic cables to these applications.

o    Educational Institutions. Colleges, universities, high schools and grade
schools are continually upgrading and improving their networks, with existing
LANs being expanded and upgraded for higher data transmission speeds, optical
fiber to the dorm and other applications. These systems link personal computers
with central file servers. As interactive learning systems require increased
transmission speeds, optical fiber becomes a logical medium.

o    Financial Institutions, Insurance Companies and Other Large Businesses.
Banks, stock trading companies, insurance companies, and other large businesses
often need to distribute time critical data among a large number of
workstations. Businesses are increasingly using fiber optic backbones to cable
their enterprise networks to meet these needs.

o    Government Agencies. Government agencies tend to have large buildings or
complexes, many people, and the need to access and process large quantities of
data. Like commercial institutions, these routinely include high performance
LANs with fiber optic segments in the backbone. Security may also be desired,
and therefore, optical fiber to the desk or workstation may be implemented.

o    Industrial and Manufacturing Facilities. Industrial and manufacturing
facilities typically have a more severe environment than other types of
businesses with heavy electrical equipment. Fiber optic cable in this
environment offers: immunity to electrical noise, ruggedness, high information
carrying capacity and greater distance capability. Our products are installed in
automotive assembly plants, steel plants, chemical and drug facilities,
petrochemical facilities and petroleum refineries, mines and other similar
environments.

o    Original Equipment Manufacturers. Original equipment manufacturers
typically manufacture fiber optic cable assemblies, which are short lengths of
fiber optic cable pre-terminated with connectors. Supporting virtually all
segments of the market, these manufacturers consume large quantities of fiber
optic cables, which are often privately labeled.

o    Military. Our core technologies enable us to develop and efficiently
produce fiber optic cables for military tactical applications that survive
extreme mechanical and environmental conditions.

o    Telephone Companies. We have worked with several regional bell operating
companies and competitive local exchange carriers to help them meet their
business customers' requirements. As high bandwidth services of the information
highway are brought closer to more homes and businesses, the bandwidth provided
by optical fiber becomes more important, and our tight buffer, rugged designs
become the most appropriate fiber optic cable for applications.

o    Internet Infrastructure Companies. Fiber optic cables are favored in many
Internet infrastructure applications, including storage area networks and riser
management systems that feed data to multiple clients in a facility by means of
a fiber optic network. Distribution of high bandwidth to support growing
clusters of DSL users and high speed fiber optic cable modems require fiber
optic cables.

Our extensive technology base and versatile manufacturing processes enable us
to respond quickly to diverse customer needs.

SALES AND MARKETING

We use a combination of employee sales staff, dedicated sales representatives,
multi-line sales representatives and distributors to serve and attract customers
both domestically and in over 65 countries. We believe


                                       11
<PAGE>

it is important to maintain customer diversity in order to avoid dependence
on any particular segment of the economy or area of the world. Our
international net sales in fiscal years 2001, 2000 and 1999 were, $14.1
million, $12.3 million and $10.0 million, respectively, or 23.3%, 21.2% and
19.7% of our net sales. International sales are made primarily through
foreign distributors, system integrators and value-added resellers.

The decision to purchase our products may be made by end-users, distributors,
electrical contractors, system integrators, or specialized installers and
influenced by architects, engineers and consultants. We strive to reach and
influence decision-makers by advertising in fiber optic trade journals and
other communications magazines. We also participate in numerous domestic and
international trade shows attended by customers and prospective customers.

Selling sophisticated and technologically advanced products requires on-going
interaction with customers and a focused effort by the sales and marketing
group during the product selection process. Our field sales force consists of
employees and dedicated and multi-line sales representatives located in
various geographic areas. For more in-depth technical support, the sales
group has access to engineering and quality control with extensive fiber
optic cable expertise and industry experience.

MANUFACTURING AND SUPPLIERS

We have developed considerable expertise in fiber optic cable design,
manufacturing and production processes that enable us to produce high
performance fiber optic cables cost effectively. Our proprietary manufacturing
software and hardware provides us with automated and technically precise
manufacturing capabilities which enable us to rapidly respond to customer
requests for additional or unique products. Many of our important technological
advances result from our ability to closely monitor, modify and refine our
production process.

Our manufacturing operations consist of applying a variety of raw plastic
materials to optical fibers. The key raw material in the manufacture of our
products is optical fiber, which we primarily purchase from four manufacturers
with other sources available. We work closely with our vendors to ensure a
continuous supply. We have two sources for aramid yarns and several suppliers of
plastic coating materials.

An important factor in our success is our ability to deliver product on time.
Therefore, we work to obtain adequate supplies of raw materials in a timely
manner from existing or, when necessary, alternate sources. Any disruption in
the supply of raw materials could adversely affect our fiber optic cable
production capability and our operating results. Some of our suppliers of
optical fiber are also our competitors. We believe that we carry a sufficient
supply of raw materials and finished goods inventory to deal with short-term
disruptions in supply of raw materials and to meet customer orders promptly.

Our quality control procedures have been instrumental in achieving high
performance and reliability in our products. Since January 1994, our quality
management system has been certified to the internationally recognized ISO 9001
quality standard. ISO 9000 is a series of standards agreed to by the
International Organization for Standardization. ISO 9001 is the highest level of
accreditation and includes an assessment of 20 elements covering various aspects
of design, development, distribution and production of fiber optic cables. We
must continue to comply with these standards to maintain our certification.

COMPETITION

The market for fiber optic cable is highly competitive. There are approximately
five leading producers of fiber optic cables in the United States. In general,
these companies primarily supply loose tube fiber optic cables, but they also
produce large volumes of


                                       12
<PAGE>

tight-buffered fiber optic cables. Corning Cabling Systems and OFS Brightwave
(formerly Lucent Technologies) are the dominant producers of fiber optic cables
for the long-haul market and are principal suppliers of optical fiber worldwide.
In the market for tight-buffered fiber optic cables supplying the short to
moderate distance market, we compete with Corning Cabling Systems and OFS
Brightwave, as well as other domestic and international companies such as
Alcatel, Draka, General Cable, Pirelli Mohawk/CDT and CommScope.

We also compete with producers of copper wire cable on the basis of cost and
performance tradeoffs. The cost of the electro-optical interfaces required for
the fiber optic networks and higher speed electronics generally associated with
high performance fiber optic networks can make them less desirable for use in
applications where the advantages of fiber optic cables are not required. We
also compete with producers of other alternative transmission media, including
wireless and satellite communications. As fiber optic components continue to
improve in performance while costs decrease, fiber optic networks become a more
cost effective solution, especially with the increasing demand for higher
transmission speeds or bandwidth.

We believe that we compete successfully against our competitors on the basis of:

   o     breadth of product features;

   o     quality;

   o     ability to meet delivery schedules;

   o     technical support and service; and

   o     total cost of installation and ownership.

Maintaining these competitive advantages requires continued investment in
product development and sales and marketing. There can be no assurance that we
will have sufficient resources to make these investments or that we will be able
to make the technological advances necessary to maintain our competitive
position. An increase in competition could have a material adverse effect on our
business and operating results because of price reductions and loss of market
share. Competition could increase if new companies enter the market or if
existing competitors expand their product lines.

Many of our competitors have substantially greater financial, marketing,
technical, human and other resources than us, and greater brand recognition and
market share which may give them competitive advantages, including the ability
to negotiate lower prices on raw materials than those available to us. We cannot
assure you that we will be able to compete successfully with existing or future
competitors or that competitive pressures will not seriously harm our business,
operating results and financial condition.

INTELLECTUAL PROPERTY

Our current manufacturing processes and products are not protected by patents.
We rely on a combination of trade secret and technical measures to establish and
protect our production technology rights. This protection may not deter
misappropriation or stop competitors from developing production techniques or
equipment with features identical, similar, or even superior to us.

We consider our proprietary knowledge of the development and manufacture of
fiber optic cables to be a valuable asset. This expertise enables us to
formulate new fiber optic cable compositions, develop special coatings and
coating methods, develop and implement manufacturing improvements and quality
control techniques, and design and construct manufacturing and quality control
equipment. We restrict access to our manufacturing facility and engineering
documentation to maintain security.

We believe that none of our products, trademarks or other proprietary rights
infringes upon the proprietary rights of others. There can be no assurance,


                                       13
<PAGE>

however, that third parties will not assert infringement claims against us in
the future with respect to our present or future products, which may require us
to enter into license agreements or result in protracted and costly litigation,
regardless of the merits of these claims.

EMPLOYEES

As of October 31, 2001, we employed a total of 201 persons on a full-time basis,
including 40 in sales, marketing and customer service, 25 in engineering,
product development and quality control, 113 in manufacturing, and 23 in finance
and administration. None of our employees is represented by a labor union. We
have experienced no work stoppages and believe our employee relations are good.

Item 2. Properties
- ------------------

Our principal administration, marketing, manufacturing, and product development
facilities are located in a 148,000 square foot building adjacent to the
Roanoke, Virginia airport and major trucking company facilities. We also lease a
385 square foot sales office in Fort Wayne, Indiana. We believe that we are
currently operating at approximately 60% of our production capacity.


                                       14
<PAGE>

Item 3.  Legal Proceedings.
- ---------------------------

           On September 27, 2000, the Equal Employment Opportunity Commission
           ("EEOC") filed a lawsuit under Title VII of the Civil Rights Act
           against the Company in the United States District Court for the
           Western District of Virginia. The lawsuit alleged a pattern or
           practice of discrimination on the bases of gender and race. The
           lawsuit sought injunctive and other relief and damages in an
           unspecified amount. On December 13, 2001, the parties reached an
           agreement as to the amount of a settlement (subject to final
           documentation and judicial review and approval), that affords both
           individual and class relief, without any admission of liability.
           Pursuant to this agreement, the Company will pay $500,000 upon entry
           of a consent decree by the court, $175,000 on the first anniversary
           and $175,000 on the second anniversary of the consent decree, to
           satisfy any gender and race class claims, $75,000 to one individual
           specifically named in the complaint, and at least $75,000 for the
           Company's planned diversity, recruitment and human resource
           management programs over the term of the consent decree.

           The Company, Mr. Robert Kopstein, our former Chairman, President and
           Chief Executive Officer, and various John Does (officers and/or
           directors of the Company during the class period) were named as
           defendants in three class action lawsuits filed in the United States
           District Court for the Western District of Virginia (the "Suits").
           The first class action lawsuit was filed on November 26, 2001, by
           Charles S. Farrell, Jr., on behalf of himself and others similarly
           situated. The second class action lawsuit was filed on December 14,
           2001, by Lerner Group, on behalf of itself and others similarly
           situated. The third class action lawsuit was filed on December 27,
           2001, by Richard Simone, on behalf of himself and others similarly
           situated. In each of the substantially similar suits, the plaintiffs
           purport to represent purchasers of the Company's common stock during
           the period ranging from July 31, 2000, through October 8, 2001, (the
           "class period") and allege that the Company violated federal
           securities laws and made fraudulent and/or negligent
           misrepresentations and/or omissions. The plaintiffs in each of the
           Suits seek compensatory and exemplary damages in an unspecified
           amount, as well as reasonable costs and expenses incurred in the
           cause of action, including attorneys' fees and expert fees.
           Management intends to vigorously defend the Suits. The Company may,
           however, incur substantial costs in defending itself against the
           Suits, regardless of their merit or outcome.

           The Company was named as a defendant in two lawsuits filed in the
           United States District Court for the Southern District of New York
           seeking to compel the Company to authorize the transfer agent to
           transfer unregistered, restricted stock on the Company's stock
           ledger. The first suit was filed on October 22, 2001 by Bear, Stearns
           & Co. Inc. and Bear, Stearns Securities Corporation, (collectively,
           "Bear Stearns"). The second suit was filed on October 26, 2001 by UBS
           PaineWebber Inc. ("PaineWebber"). In each case the plaintiffs sought
           injunctive relief with respect to transfers of shares of
           unregistered, restricted common stock of the Company sold in the
           course of liquidating brokerage accounts or repossessed shares of the
           former Chairman, President and Chief Executive Officer to cover
           personal margin loans to him. Each of the lawsuits contains a claim
           for damages caused by the alleged wrongful refusal by the Company to
           authorize the transfers in connection with the liquidations. On
           October 31, 2001, the Court in the Bear Stearns case entered an order
           directing the Company to authorize the stock transfers in connection
           with such transfers. In early November, the Company reached agreement
           with UBS PaineWebber pursuant to which the Company would authorize
           stock transfers in connection with the liquidation of unregistered,
           restricted stock of the Company held by PaineWebber upon the
           foreclosure of a brokerage account of the former officer. Neither of
           the cases has been dismissed; however, the Company believes that they
           will be resolved without any material liability on the part of the
           Company.



                                       15
<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------

There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended October 31, 2001.



                                       16
<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.
- -------------------------------------------------------------------------------

         Our Common Stock is traded on the Nasdaq National Market under the
         symbol "OCCF." As of October 31, 2001, there were approximately 7,841
         shareholders of record. On January 25, 2002, our Common Stock
         closed at a price of $1.26 per share.

         The following table sets forth for the fiscal periods indicated the
         high and low bid prices of our Common Stock, as reported on the Nasdaq
         National Market, during the two most recent fiscal years:

<TABLE>
                                                                   RANGE OF BID PRICES
                                                                  --------------------
FISCAL YEAR ENDED OCTOBER 31, 2001
                                                              HIGH                     LOW
                                                              ----                     ---

<S>                                                          <C>                      <C>
First Quarter (November 1, 2000 to January 31, 2001)         $17.94                   $8.50
Second Quarter (February 1 to April 30, 2001)                $14.25                   $9.06
Third Quarter (May 1 to July 31, 2001)                       $14.05                   $7.10
Fourth Quarter (August 1 to October 31, 2001)                 $9.35                   $1.06



                                                                   RANGE OF BID PRICES
                                                                   -------------------

FISCAL YEAR ENDED OCTOBER 31, 2000
                                                              HIGH                     LOW
                                                              ----                     ---

First Quarter (November 1, 1999 to January 31, 2000)         $32.15                  $7.08
Second Quarter (February 1 to April 30, 2000)                $44.92                 $12.92
Third Quarter (May 1 to July 31, 2000)                       $25.67                 $12.50
Fourth Quarter (August 1 to October 31, 2000)                $24.88                 $11.14
</TABLE>


         We have not paid or declared any cash dividends on our common stock
         since our initial public offering in April 1996 and do not expect to do
         so in the foreseeable future. We currently intend to retain future
         earnings, if any, to finance the expansion of our business.

         We did declare a rights dividend in connection with the adoption of our
         shareholders' rights plan on November 2, 2001. See Note 12 to the
         financial statements for additional details.

                                       17
<PAGE>

Item 6.  Selected Financial Data.
- ---------------------------------


                           OPTICAL CABLE CORPORATION
                        Selected Financial Information
              (in thousands, except per share data and footnotes)


<TABLE>
<CAPTION>
                                                                 Years Ended October 31,
                                               -------------------------------------------------------
                                                 2001        2000        1999        1998       1997
                                               --------    --------    --------   ---------   --------
<S>                                            <C>        <C>          <C>         <C>        <C>
Statement of Operations Information:
      Net sales                                $ 60,405    $ 58,219    $ 50,699    $ 50,589   $ 52,189
      Cost of goods sold                         35,983      30,878      27,547      29,330     30,613
                                               --------    --------    --------   ---------   --------
                 Gross profit                    24,422      27,341      23,152      21,259     21,576

      Selling, general and administrative
           expenses                              17,131      15,024      10,799       9,939      9,572
                                               --------    --------    --------   ---------   --------
                 Income from operations           7,291      12,317      12,353      11,320     12,004
      Other income (expense):
           Gains (losses) on trading
           securities, net (1)                  (11,414)        289          --          --         --
           Interest income (expense), net          (318)        173         202          55         (3)
           Other, net                                 9         (45)        (36)          2        (44)
                                               --------    --------    --------   ---------   --------
                 Income (loss) before income
                        tax expense              (4,432)     12,734      12,519      11,377     11,957
      Income tax expense (2)                      2,297       4,479       4,214       4,107      4,150
                                               --------    --------    --------   ---------   --------
                 Net income (loss)             $ (6,729)   $  8,255    $  8,305    $  7,270   $  7,807
                                               ========    ========    ========   =========   ========
      Net income (loss) per share:
           Basic                               $  (0.12)   $   0.15    $   0.15    $   0.13   $   0.14
                                               ========    ========    ========   =========   ========
           Diluted                             $  (0.12)   $   0.15    $   0.15    $   0.13   $   0.13
                                               ========    ========    ========   =========   ========
           Weighted average shares:
                 Basic                           56,156      56,307      56,504      57,431     58,013
                                               ========    ========    ========   =========   ========
                 Diluted                         56,346      56,758      56,865      57,863     58,526
                                               ========    ========    ========   =========   ========
Balance Sheet Information:
      Cash and cash equivalents                $  2,088    $  1,459    $  6,817    $  1,122   $    986
      Trading securities                             --      17,983          --          --         --
      Working capital                            14,205      31,986      21,980      18,991     19,912
      Total assets                               42,798      52,688      37,512      32,829     35,214
      Short-term borrowings                       8,271       5,659          --          --         --
      Total stockholders' equity                 27,865      43,508      32,847      29,991     31,379

</TABLE>

_________________

(1)   In January 2000, we began actively buying and selling shares in the Nasdaq
      100 Trust, which is designed to closely track the price and yield
      performance of the Nasdaq 100 stock index. Our active trading in the
      Nasdaq 100 Trust continued through May 14, 2001, the date of the last
      purchase of these shares. On October 3, 2001, as part of a policy to
      invest future excess funds only in short-term interest-bearing
      investments, we sold all of our remaining investment in the Nasdaq 100
      Trust and paid off the outstanding margin borrowings. For accounting
      purposes, we categorized our investment in the Nasdaq 100 Trust as trading
      securities, and we recorded the investment on our balance sheet at fair
      value, which was based on quoted market prices. Realized and unrealized
      net gains or losses were included in other income (expense), net.

(2)   The effect of establishing a valuation allowance against our deferred tax
      assets relating to the capital loss carryforward generated by the sale of
      our trading securities during fiscal year 2001 resulted in an increase in
      income tax expense of approximately $4.1 million for fiscal year 2001. See
      note 9 of the notes to the financial statements for further information on
      income taxes.



                                       18
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Result
- -------------------------------------------------------------------------------
         of Operations
         -------------

Forward-Looking Information

This report may contain certain "forward-looking" information within the
meaning of the federal securities laws. The forward-looking information may
include, among other information, statements concerning our outlook for the
future, statements of belief, future plans, strategies or anticipated events,
and similar information and statements concerning matters that are not
historical facts.  The forward-looking information is subject to risks and
uncertainties that may cause actual events to differ materially from our
expectations.  Factors that could cause or contribute to such differences
include, but are not limited to, the level of sales to key customers or
distributors; the economic conditions affecting network service providers; the
slowdown in corporate spending on information technology; actions by
competitors; fluctuations in the price of raw materials (including optical
fiber); our dependence on a single manufacturing facility; our ability to
protect our proprietary manufacturing technology; market conditions influencing
prices or pricing; our dependence on a limited number of suppliers; volume
commitments made to certain of our suppliers; an adverse outcome in litigation,
claims and other actions, and potential litigation, claims and other actions
against us, including, but not limited to, the shareholder litigation that has
been filed and other claims related to actions of our former Chairman, President
and Chief Executive Officer; the effect of sales of common stock by the various
brokerage firms alleging that our former Chairman, President and Chief Executive
Officer pledged substantially all of his personally-held unregistered shares of
the Company to cover personal margin loans; technological changes and
introductions of new competing products; the current recession; terrorist
attacks or acts of war, particularly given the acts of terrorism against the
United States on September 11, 2001 and subsequent military responses by the
United States; ability to retain key personnel; changes in market demand;
exchange rates; productivity; weather; and market and economic conditions in the
areas of the world in which the Company operates and markets its products.

Amounts presented in the following discussion have been rounded to the nearest
hundred thousand, unless the amounts are less than one million, in which case
the amounts have been rounded to the nearest thousand.

Overview

We are a leading manufacturer of a broad range of tight-buffered fiber optic
cables primarily for the local area network and premise markets, often referred
to as the enterprise market. Our tight-buffered fiber optic cables are well-
suited for use in short to moderate distance applications to connect
metropolitan, access and enterprise networks. Our tight-buffered fiber optic
cables are derived from technology originally developed for military
applications requiring rugged, flexible and compact fiber optic cables. Our
tight-buffered fiber optic cables can be used both indoors and outdoors, are
easy and economical to install, provide a high degree of reliability and offer
industry leading performance characteristics. We have designed and implemented
an efficient and automated manufacturing process based on proprietary
technologies. This enables us to produce high quality indoor/outdoor tight-
buffered fiber optic cable rapidly and cost efficiently.

We sell our products through our sales force to original equipment manufacturers
and to major distributors, regional distributors and various smaller
distributors.  In fiscal years 2001, 2000 and 1999, 49.6%, 58.0% and 63.2% of
our net sales were from sales to our distributors.  International net sales were
23.3%, 21.2% and 19.7% in fiscal years 2001, 2000 and 1999.  Substantially all
of our international sales are denominated in U.S. dollars.

                                      19
<PAGE>

Net sales consist of gross sales of products, less discounts, refunds and
returns. Revenue is recognized at the time of product shipment or delivery to
the customer and the customer takes ownership and assumes risk of loss, based on
shipping terms. In fiscal year 2001, 13.6% of our net sales were attributable to
one major domestic distributor. In fiscal years 2000 and 1999, this same
distributor accounted for 12.5% and 15.8% of our net sales, respectively.
Subsequent to October 31, 2001, this distributor advised us that it will no
longer stock our products as part of its regular product offering. In fiscal
years 2000 and 1999, 15.5% and 14.8% of our net sales were attributable to a
second major distributor. This second distributor filed for protection from its
creditors under bankruptcy laws in January 2001. As of October 31, 2000, we
reserved and expensed approximately $1.8 million for estimated uncollectible
accounts receivable from this second distributor. As of January 31, 2001, we
wrote off that $1.8 million reserve as well as expensed an additional $419,000,
for a total expense of $2.2 million for estimated uncollectible accounts
receivable from this distributor over fiscal years 2001 and 2000. Other than
these two distributors, no single customer accounted for more than 10% of our
net sales in fiscal years 2001, 2000 or 1999.

A significant percentage of the selling price of our fiber optic cable is based
on the cost of raw materials used. Because single-mode fiber is less expensive
than multimode fiber, single-mode fiber optic cables have a lower per unit
selling price than comparable multimode fiber optic cables. We believe that the
metropolitan and access markets are predominantly users of single-mode fiber
optic cable, and that increasingly, single-mode fiber is also being used for
other short to moderate distance installations. To the extent that our product
mix shifts toward single-mode cables (whether or not as a result of a shift in
our sales mix shifts toward the metropolitan and access markets), we will have
to increase the volume of our sales to maintain our current level of net sales.
Although we currently have excess capacity, increased volume may require us to
expand our manufacturing capacity more rapidly.

Cost of goods sold consists of the cost of materials, compensation costs,
product warranty costs and overhead related to our manufacturing operations. The
largest percentage of costs included in cost of goods sold is attributable to
costs of materials which are variable as opposed to fixed costs. As a result,
cost of goods sold typically changes in proportion to increases and decreases in
net sales.

Selling, general and administrative expenses consist of the compensation costs
for sales and marketing personnel, shipping costs, travel expenses, customer
support expenses, trade show expenses, advertising, bad debt expense, the
compensation cost for administration, finance and general management personnel,
as well as legal and accounting fees.

Other income (expense), net consists primarily of realized and unrealized net
gains (losses) on trading securities, interest income and interest expense. In
January 2000, we began actively buying and selling shares in the Nasdaq 100
Trust, which is designed to closely track the price and yield performance of the
Nasdaq 100 stock index. We utilized short-term margin borrowings payable to an
investment broker to finance our position in these trading securities. Our
margin borrowings were collateralized by the trading securities and were subject
to margin provisions, which could have resulted in the sale of some or all of,
and on certain occasions did result in the sale of some of, the trading
securities to meet margin calls. Our active trading in the Nasdaq 100 Trust
continued through May 14, 2001, the date of the last purchase of these shares.
On October 3, 2001, as part of a policy to invest future excess funds only in
short-term interest bearing investments, we sold all of our remaining investment
in the Nasdaq 100 Trust and paid off the outstanding margin borrowings. Our
Board of Directors has adopted an Investment Objectives and Guidelines policy,
in which we state that we will make no additional cash investments in the above-
mentioned Nasdaq 100 Trust or in stocks of other companies. In addition, our
Investment Objectives and Guidelines policy states that any future investments
will be in U.S. dollar denominated, short-term, interest-bearing, investment-
grade securities.

                                       20
<PAGE>

For accounting purposes, we categorized our investment in the Nasdaq 100 Trust
as trading securities, and we recorded the investment on our balance sheet at
fair value, which was based on quoted market prices. Purchases and sales of
trading securities were recognized on a trade-date basis, the date the order to
buy or sell is executed. Net realized gains or losses were determined on the
first-in, first-out cost method. We marked our investment to market on each
balance sheet date. Any decline in fair value was recorded as an unrealized
loss, while any increase in fair value was recorded as an unrealized gain.
Realized gains and losses and unrealized holding gains and losses for trading
securities were included in other income (expense), net.

In fiscal year 2001, we recognized realized net losses of $11.4 million in
connection with our securities trading activities in other expense, net.  In
fiscal year 2001, we incurred interest expense of $305,000 on the margin
borrowings.  As of October 31, 2001, we held no trading securities in accordance
with our current investment policy and had no outstanding margin borrowings.

In fiscal year 2000, we recognized realized and unrealized net gains of $289,000
in other income, net and continued to hold approximately $18.0 million of these
trading securities as of October 31, 2000.  The amount of net unrealized holding
loss included in other income, net in fiscal year 2000 was $500,000.    As of
October 31, 2000, we had short-term margin borrowings of $5.7 million payable to
an investment broker related to the trading securities.  We incurred interest
expense of $57,000 on the margin borrowings in fiscal year 2000.

Results of Operations

The following table sets forth selected line items from our statements of
operations as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
                                                      Years Ended October 31,
                                                ------------------------------------
                                                   2001         2000         1999
                                                ------------------------------------
<S>                                             <C>          <C>          <C>
Net sales                                          100.0 %     100.0%        100.0%
Cost of goods sold                                  59.6        53.0          54.3
                                                 -------     -------      --------
          Gross profit                              40.4        47.0          45.7
Selling, general and administrative expenses        28.3        25.8          21.3
                                                 -------     -------      --------
          Income from operations                    12.1        21.2          24.4
Other income (expense), net                        (19.4)        0.7           0.3
                                                 -------     -------      --------
          Income (loss) before income tax
               expense                              (7.3)       21.9          24.7
Income tax expense                                   3.8         7.7           8.3
                                                 -------     -------      --------
          Net income (loss)                        (11.1)%      14.2%         16.4%
                                                 =======     =======      ========
- --------------------------------------------------------------------------------------
</TABLE>


Net Sales.  Net sales increased 3.8% from $58.2 million in fiscal year 2000 to
$60.4 million in fiscal year 2001.  This increase was attributable to record net
sales during our first and second quarters of fiscal year 2001, substantially
offset by lower sales in the third and fourth quarters.  The decrease in net
sales in the third and fourth quarters resulted from the impact of weak economic
conditions on market demand, as the industries we serve reduced or delayed
capital spending. During fiscal year 2001, a decrease in demand for cable
containing multimode fiber (which typically has a higher relative sales price)
was partially offset by an increase in demand for cable containing single-mode
fiber (which typically has a lower relative sales price). Total fiber meters
shipped increased 9.8% from 199.3 million fiber meters shipped in fiscal year
2000, to 218.8 million fiber meters shipped in fiscal year 2001. This net
increase in fiber meters shipped was a result of a 5.2 million decrease in
multimode fiber meters shipped and a 24.7 million increase in single-mode fiber
meters shipped. Cable containing multimode fiber is generally used for
communications over shorter distances where the higher bandwidth capacity and
the higher transmission equipment cost of single-mode fiber is not required.
Multimode fiber cable is often used in datacom applications. Cable containing
single-

                                       21
<PAGE>

mode fiber is generally used for communications over longer distances and
where higher bandwidth capacity is required.  Single-mode fiber cable is often
used in telecom, CATV and various internet applications.  Net sales increased
14.8% from $50.7 million in fiscal 1999 to $58.2 million in fiscal 2000.  This
increase was attributable to increased sales volume.  Total fiber meters shipped
increased 18.5% from 168.2 million during fiscal year 1999 to 199.3 million
shipped for the same period in 2000.  This increase in fiber meters shipped was
a result of a 13.8 million increase in multimode fiber meters shipped and a 17.3
million increase in single-mode fiber meters shipped.

Gross Profit.  Gross profit decreased 10.7% from $27.3 million in fiscal year
2000 to $24.4 million in fiscal year 2001. Gross margin, or gross profit as a
percentage of net sales, was 47.0% in fiscal year 2000 compared to 40.4% in
fiscal year 2001. This decrease in gross margin is primarily attributable to
adjustments booked in the fourth quarter of fiscal year 2001 that increased cost
of goods sold. These adjustments included a $1.2 million write-down of slow
moving and impaired inventory to net realizable value, the disposal of $197,000
of impaired finished goods inventory during the fourth quarter of fiscal year
2001, and adjustments of approximately $1.3 million caused by book to physical
variances resulting from year-end physical inventory counts, a substantial
portion of which related to work-in-process inventories. Net sales to
distributors were 58.0% of net sales in fiscal year 2000 compared to 49.6% in
fiscal year 2001, while during fiscal year 2001 there was an increase in the
ratio of large orders to total orders. Gross profit increased 18.1% from $23.2
million in fiscal year 1999 to $27.3 million in fiscal year 2000. Gross margin
was 45.7% in fiscal year 1999 compared to 47.0% in fiscal year 2000. This slight
increase was due to the impact of the decrease in the ratio of large orders, the
decrease in the ratio of net sales attributable to our distributors and reduced
raw fiber prices during the year. Net sales to distributors were 63.2% of total
net sales in fiscal year 1999 compared to 58.0% in fiscal year 2000.

Selling, General and Administrative. Selling, general and administrative
expenses increased 14.0% from $15.0 million in fiscal year 2000 to $17.1 million
in fiscal year 2001. Selling, general and administrative expenses as a
percentage of net sales were 25.8% in fiscal year 2000 compared to 28.3% in
fiscal year 2001. This increase is partly attributable to various charges
incurred during the fourth quarter of fiscal year 2001, including a $902,000
charge for an anticipated settlement with the Equal Opportunity Commission
(EEOC) for alleged prior discriminatory practices and related complaints (on
December 13, 2001 we reached an agreement with the EEOC as to the amount of a
settlement, but it is subject to final documentation and judicial review and
approval), a $411,000 charge to write off deferred costs related to the aborted
securities offering previously anticipated during fiscal year 2001, and a
$102,000 charge for costs related to a business development project. In
addition, legal expenses for fiscal year 2001 totaled $705,000 compared to
$250,000 in fiscal year 2000. Also contributing to the increase in selling,
general and administrative expenses in fiscal year 2001 were higher other
professional fees. Bad debt expense for fiscal year 2001 totaled $1.1 million,
of which $508,000 related to an increase in the bad debt reserve in the fourth
quarter and $419,000 related to one of our distributors that filed for
protection from its creditors under the bankruptcy laws in January 2001. By
comparison bad debt expense for fiscal year 2000 totaled $2 million, of which
$1.8 million related to a specific reserve for estimated uncollectible accounts
receivable from that same bankrupt distributor. Selling, general and
administrative expenses increased 39.1% from $10.8 million in fiscal year 1999
to $15.0 million in fiscal year 2000. Selling, general and administrative
expenses as a percentage of net sales were 21.3% in fiscal year 1999 compared to
25.8% in fiscal year 2000. This increase was primarily the result of an increase
in bad debt expense of $2 million. This increase is primarily attributable to a
$1.8 million specific reserve for estimated uncollectible accounts receivable
from one of our distributors that filed for protection from its creditors under
the bankruptcy laws in January 2001. Other factors that contributed to the
increase in selling, general and administrative expenses in fiscal year 2000
include an increase in our sales force, the continued expansion of marketing
efforts and an increase in legal fees associated with the EEOC litigation and
related complaints that had been filed against us with the EEOC.

                                       22
<PAGE>

Income from Operations.  Income from operations decreased 40.8% from $12.3
million in fiscal year 2000 to $7.3 million in fiscal year 2001.  This decrease
was due to the $2.9 million decrease in gross profit and the $2.1 million
increase in selling, general and administrative expenses.  Income from
operations decreased 0.3% from $12.4 million in fiscal year 1999 to $12.3
million in fiscal year 2000.  This slight decrease was due to the $4.2 million
increase in gross profit, offset by the $4.2 million increase in selling,
general and administrative expenses.

Other Income (Expense), Net.  Other income, net decreased from $417,000 in
fiscal year 2000 to other expense, net of $(11.7) million in fiscal year 2001.
This decrease was primarily due to losses on our trading securities.  We
recognized gains on trading securities, net of $289,000 in fiscal year 2000
compared to losses on trading securities, net of $11.4 million in fiscal year
2001.  In addition, in fiscal year 2000, we incurred interest expense of
$57,000, compared to $363,000 in fiscal year 2001.  Also, interest income was
$184,000 lower in fiscal year 2001 when compared to fiscal year 2000.  Please
see our discussion of trading securities in "Overview" above.  Other income, net
increased 151.3% from $166,000 in fiscal year 1999 to $417,000 in fiscal year
2000.  We began investing in trading securities and recognized related gains on
trading securities, net of $289,000 in other income, net for fiscal year 2000.
The increase in other income, net resulting from gains on trading securities,
net was partially offset by interest expense of $57,000 on short-term margin
borrowings related to the trading securities.

Income (Loss) Before Income Tax Expense.  Income (loss) before income tax
expense decreased from $12.7 million in fiscal year 2000 to $(4.4) million in
fiscal year 2001.  This decrease was primarily due to the $11.4 million losses
on trading securities, net and the $2.1 million increase in selling, general and
administrative expenses, and the $2.9 million decrease in gross profit.  Income
before income tax expense increased 1.7% from $12.5 million in fiscal year 1999
to $12.7 million in fiscal year 2000.  This increase was primarily due to
increases in sales volume, gross profit and other income, net, partially offset
by the $4.2 million increase in selling, general and administrative expenses.

Income Tax Expense.  Income tax expense decreased 48.7% from $4.5 million in
fiscal year 2000 to $2.3 million in fiscal year 2001. Notwithstanding the loss
before income taxes during fiscal year 2001, we reported income tax expense in
fiscal year 2001 rather than an income tax benefit, due to the establishment of
a valuation allowance for deferred tax assets in the amount of $4.1 million
relating to the capital loss carryforward generated by the sale of our trading
securities during fiscal year 2001. As of October 31, 2001, this valuation
allowance was established because we believe it is more likely than not that we
will not be able to generate future taxable capital gains to realize the benefit
of our deferred tax asset related to the capital loss carryforward generated by
our securities trading losses. In addition, the capital loss carryforward may be
limited due to certain stock ownership changes. In order to fully realize this
deferred tax asset, we would need to generate future taxable capital gains of
approximately $11.1 million prior to the expiration of the capital loss
carryforward in 2006. Income tax expense increased 6.3% from $4.2 million in
fiscal year 1999 to $4.5 million in fiscal year 2000. Our effective tax rate was
33.7% in fiscal year 1999 compared to 35.2% in fiscal year 2000. Fluctuations in
our effective tax rates are due primarily to the amount and timing of the tax
benefits related to our Extraterritorial Income Exclusion and foreign sales
corporation which exempts from federal income taxation a portion of the net
profit realized from sales outside of the United States of products manufactured
in the United States.

Net Income (Loss).  Net income decreased from $8.3 million in fiscal year 2000
to a net loss of $(6.7) million in fiscal year 2001.  This decrease was
primarily due to the $11.4 million in losses on trading securities, net and the
$2.1 million increase in selling, general and administrative expenses, the $2.9
million decrease in gross profit, partially offset by the $2.2 million decrease
in income tax expense.  Net income decreased $50,000 from fiscal year 1999 to
$8.3 million in fiscal year 2000.  This slight decrease was due to the increase
in selling, general and administrative expenses and the $265,000 increase in
income tax expense, partially offset by the increases in sales volume, gross
margin and other income, net.

                                       23
<PAGE>

Liquidity and Capital Resources

Our primary capital needs have been to fund working capital requirements and
capital expenditures. Our primary source of capital for these purposes has been
cash provided from operations and borrowings under our bank lines of credit
described below. The outstanding balance under our lines of credit totaled $8.3
million as of the end of fiscal year 2001. There was no balance outstanding
under our lines of credit as of the end of fiscal year 2000. During the course
of fiscal year 2001, we also used $9.3 million to repurchase shares of our
common stock under our share repurchase program described below.

Our cash and cash equivalents totaled $2.1 million as of October 31, 2001, an
increase of $629,000, compared to $1.5 million as of October 31, 2000.  The cash
and cash equivalents increase in fiscal year 2001 was primarily due to cash
provided by operating activities of $3.9 million (which includes the liquidation
of all trading securities on October 3, 2001, as part of a policy to invest
future excess funds only in short-term interest-bearing investments and the pay
off of all margin borrowings in connection with the securities trading), and
borrowings under our bank lines of credit in the amount of $8.3 million, which
was partially offset by the purchase of property and equipment totaling $2.5
million and the repurchase of common stock totaling $9.3 million related to our
common stock repurchase program.

On October 31, 2001, we had working capital of $14.2 million, compared to $32.0
million as of October 31, 2000, a decrease of $17.8 million.  The ratio of
current assets to current liabilities as of October 31, 2001, was 2.0 to 1,
compared to 4.6 to 1 as of October 31, 2000.  The change in working capital was
primarily caused by a decrease in trading securities of $18.0 million, a
decrease in trade accounts receivable, net of $679,000, an increase in the
amount payable under our bank lines of credit of $8.3 million and an increase in
accounts payable and accrued expenses of $3.1 million, partially offset by an
increase in inventories of $6.5 million and a decrease in the amount payable to
investment broker of $5.7 million.

Net cash provided by operating activities was $3.9 million in fiscal year 2001.
Net cash used in operating activities was $5 million in fiscal year 2000.  Net
cash provided by operating activities was $11.9 million for fiscal year 1999.
Net cash provided by operating activities in fiscal year 2001 was primarily
affected by the sale of approximately $18.0 million in trading securities
resulting in a realized loss of $11.4 million, cash provided by operating
income, and an increase in accounts payable and accrued expenses and other
liabilities of $3.6 million, partially offset by an increase in inventories of
$6.5 million and a decrease in the amount payable to investment broker of $5.7
million. For fiscal year 2000, net cash used in operating activities was
primarily affected by the net purchase of approximately $18.5 million in trading
securities, an increase in trade accounts receivable of $3.0 million, and a
decrease in accounts payable and accrued expenses of $1.1 million, partially
offset by cash provided by operating income, realized net gains on trading
securities of $788,000, a decrease in inventories of $1.2 million and an
increase in amounts payable to investment broker of $5.7 million. Net cash
provided by operating activities in fiscal year 1999 was primarily provided by
operating income, a decrease in inventory of $1.2 million and an increase in
accounts payable and accrued expenses of $1.3 million. We have entered into
written agreements to purchase raw optical fiber. These commitments total $12.2
million, $14.1 million, $8.6 million, and $1.2 million in fiscal years 2002,
2003, 2004 and 2005, respectively.

Net cash used in investing activities totaled $2.6 million, $1.4 million and
$553,000 for fiscal years 2001, 2000 and 1999.  Net cash used in investing
activities was mainly for expenditures related to facilities and equipment for
fiscal years 2001, 2000 and 1999.  There are no material commitments for capital
expenditures as of October 31, 2001.

Net cash used in financing activities was $715,000 for fiscal year 2001.  Net
cash provided in financing activities was $1 million for fiscal year 2000.  Net
cash used in financing activities was $5.7 million for fiscal

                                       24
<PAGE>

year 1999. Net cash used in financing activities for the fiscal year 2001 was
primarily the result of $9.3 million used to repurchase shares of our common
stock, partially offset by an $8.3 million increase in our bank lines of credit.
Net cash provided by financing activities for fiscal year 2000 was primarily
related to proceeds received from the exercise of employee stock options. Net
cash used in financing activities for fiscal year 1999 was primarily related to
the repurchase of shares of our common stock.

On September 27, 2000, the EEOC filed a lawsuit under Title VII of the Civil
Rights Act against us in the United States District Court for the Western
District of Virginia. The lawsuit alleges a pattern or practice of
discrimination on the bases of gender and race. The lawsuit seeks injunctive and
other relief and damages in an unspecified amount. On December 13, 2001, the
parties reached an agreement as to the amount of a settlement (subject to final
documentation and judicial review and approval) that affords both individual and
class relief, without any admission of liability. Pursuant to this agreement, we
will pay $500,000 upon entry of a consent decree by the court, $175,000 on the
first anniversary and $175,000 on the second anniversary of the consent decree
to satisfy any gender and race class claims; $75,000 to one individual
specifically named in the complaint; and at least $75,000 for our planned
diversity, recruitment, and human resource management programs over the term of
the consent decree.

The Company, Mr. Robert Kopstein, our former chairman, president, chief
executive officer and majority shareholder, and various John Does (our officers
and/or directors during the class period) were named as defendants in three
class action lawsuits filed in the United States District Court for the Western
District of Virginia. In each of the substantially similar suits, the plaintiffs
purport to represent purchasers of our common stock during the period ranging
from July 31, 2000 through October 8, 2001, and allege that we violated federal
securities laws and made fraudulent and/or negligent misrepresentations and/or
omissions. The plaintiffs in each of these lawsuits seek compensatory and
exemplary damages in an unspecified amount, as well as reasonable costs and
expenses incurred in the causes of action, including attorneys' fees and expert
fees. Management intends to vigorously defend these lawsuits. We may, however,
incur substantial costs in defending ourselves against the lawsuits, regardless
of their merit or outcome. At this early stage in the lawsuits, management
cannot make a reasonable estimate of the monetary amount of their resolution or
estimate a range of reasonably possible losses, if any. If we are unsuccessful
in defending these lawsuits, we could be subject to damages that may be
substantial and could have a material adverse affect on our financial position,
results of operations or liquidity.

We were named as a defendant in two lawsuits filed in United States District
Court for the Southern District of New York seeking to compel us to authorize
our transfer agent to transfer unregistered, restricted stock on our stock
ledger. The first suit was filed on October 22, 2001, by Bear, Stearns & Co.
Inc. and Bear, Stearns Securities Corporation (collectively, "Bear Stearns").
The second suit was filed on October 26, 2001, by UBS PaineWebber Inc.
("PaineWebber"). In each case the plaintiffs sought injunctive relief with
respect to transfers of shares of unregistered, restricted common stock of
Optical Cable Corporation sold in the course of liquidating brokerage accounts
or repossessed shares of our former Chairman, President, Chief Executive Officer
and majority shareholder to cover personal loans to him. Each of the lawsuits
contains a claim for damages caused by the alleged wrongful refusal by us to
authorize the transfers in connection with the liquidation. On October 31, 2001,
the court in the Bear Stearns case entered an order directing us to authorize
the stock transfers sought by Bear Stearns and imposing certain conditions on
Bear Stearns in connection with such transfers. In early November 2001, we
reached an agreement with PaineWebber pursuant to which we would authorize stock
transfers in connection with the liquidation of unregistered, restricted stock
held by PaineWebber upon the foreclosure of a brokerage account of the former
officer. Neither of the cases has been dismissed; however, management believes
that these

                                       25
<PAGE>

suits will be resolved without any material liability. Management also believes
that any claim that we improperly interfered with the sale or transfer of the
unregistered, restricted shares is without merit.

In October 1997, our Board of Directors authorized the initiation of a stock
repurchase program whereby we could repurchase shares of our common stock in
open market or in privately negotiated transactions.  From time to time, our
Board of Directors increased the total dollar amount of the stock repurchase
program, which was eventually increased to $25 million. Through October 31,
2001, we had repurchased 3.2 million shares of our common stock for
approximately $24.1 million under this stock repurchase program. The repurchases
were funded through operating cash flow and borrowings under our lines of
credit. During fiscal year 2001, we repurchased 1.1 million shares of our common
stock in open market transactions at a total cost of $9.3 million. Effective
September 20, 2001, we ceased the repurchase of shares of our common stock under
the share repurchase program.

Under a loan agreement with our bank dated March 10, 1999, we had $5 million
secured revolving line of credit and a $10 million secured revolving line of
credit. The lines of credit are subject to certain restrictive covenants. During
fiscal year 2001, we violated certain restrictive covenants. Effective October
30, 2001, the bank waived our defaults under the loan agreement, amended the
loan agreement and reduced the $10 million line of credit to $4.5 million for a
maximum combined availability of $9.5 million. As of October 31, 2001, we had
combined outstanding borrowings under these lines of credit in the amount of
$8.3 million, with $1.2 million unused and available. The lines of credit bear
interest at 1.5% above the monthly LIBOR rate (3.79% at October 31, 2001) and
are equally and ratably collateralized by our accounts receivable, contract
rights, inventory, furniture and fixtures, machinery and equipment and general
intangibles. The lines of credit will expire on March 31, 2002, unless they are
further renewed or extended. We are currently negotiating potential lines of
credit of $15 to $20 million with a number of financial institutions, including
our bank, to replace our current lines of credit. We believe that our cash flow
from operations, current cash balances, and the lines of credit we are working
to put in place will be adequate to fund our operations for at least the next
twelve months.


                                       26
<PAGE>

Recent Developments

On December 3, 2001, the Company issued a press release that announced that,
upon the recommendation of an independent Special Committee of its Board of
Directors (the "Special Committee"), the Board of Directors had removed Robert
Kopstein as the Company's Chairman, President and Chief Executive Officer. We
have offered Mr. Kopstein to consider entering into a consulting arrangement
with us and are currently in discussions with him.

On October 31, 2001, we announced that the Special Committee had retained C.E.
Unterberg, Towbin ("Unterberg") as the exclusive financial advisor to the
Company and the Special Committee. On January 17, 2002, our Board of Directors
dissolved the Special Committee, however, we have continued to retain Unterberg
with respect to certain strategic financial matters.

New Accounting Standards

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets.  SFAS No. 141 requires the use of the
purchase method of accounting for all business combinations.  The use of the
pooling-of-interests method is prohibited for business combinations initiated
after June 30, 2001.  SFAS No. 142 requires that goodwill and certain intangible
assets would no longer be amortized, but rather be tested for impairment
annually or whenever an event occurs indicating that the asset may be impaired.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.
Neither standard is expected to have a material effect on our financial
position, results of operations or liquidity.

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs.  The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and (or) normal use of the asset.

SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made.  The fair value of the liability is added to
the carrying amount of the associated asset and this additional carrying amount
is depreciated over the life of the asset.  The liability is accreted at the end
of each period through charges to operating expense.  If the obligation is
settled for other than the carrying amount of the liability, an entity would
recognize a gain or loss on settlement.

SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We
are currently evaluating the impact of SFAS No. 143 on our financial position,
results of operations and liquidity.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.  SFAS No. 144
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of; however, it retains many of the
fundamental provisions of that Statement.

                                       27
<PAGE>

SFAS No. 144 also supersedes the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business.
However, it retains the requirement in APB No. 30 to report separately
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment, or in a distribution to
owners) or is classified as held for sale.  By broadening the presentation of
discontinued operations to include more disposal transactions, the FASB has
enhanced management's ability to provide information that helps financial
statement users to assess the effects of a disposal transaction on the ongoing
operations of an entity.

SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years.  Early application is encouraged.
The provisions of SFAS No. 144 generally are to be applied prospectively.  We
are currently evaluating the impact of SFAS No. 144 on our financial position,
results of operations and liquidity.

As of October 31, 2001, there are no other new accounting standards issued, but
not yet adopted by us, which are expected to be applicable to our financial
position, operating results or financial statement disclosures.

                                       28
<PAGE>

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

We do not engage in transactions in derivative financial instruments or
derivative commodity instruments. As of October 31, 2001, our financial
instruments were not exposed to significant market risk due to interest rate
risk, foreign currency exchange risk, commodity price risk or equity price risk.


                                      29
<PAGE>

Item 8.  Financial Statements and Supplementary Data

                           OPTICAL CABLE CORPORATION

                       Index to Financial Statements and
                         Financial Statement Schedules


                                                                            Page

Financial Statements:

    Independent Auditors' Report                                             31

    Balance Sheets as of October 31, 2001 and 2000                           32

    Statements of Operations for the Years Ended October 31, 2001, 2000
    and 1999                                                                 33

    Statements of Stockholders' Equity for the Years Ended October 31,
    2001, 2000 and 1999                                                      34

    Statements of Cash Flows for the Years Ended October 31, 2001, 2000
    and 1999                                                                 35

    Notes to Financial Statements                                            36


Financial Statement Schedules:

All schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes thereto.
<PAGE>

                         Independent Auditors' Report


The Board of Directors and Stockholders
Optical Cable Corporation:


We have audited the accompanying balance sheets of Optical Cable Corporation as
of October 31, 2001 and 2000, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Optical Cable Corporation as of
October 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the years in the three-year period ended October 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

                                   /s/KPMG LLP

Roanoke, Virginia
December 14, 2001, except as to note 13,
    which is as of December 27, 2001

                                      31
<PAGE>

                           OPTICAL CABLE CORPORATION
                                Balance Sheets
                           October 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                                  October 31,
                                                                                           -------------------------
                                           Assets                                              2001          2000
                                                                                           -----------   -----------
<S>                                                                                        <C>           <C>
Current assets:
   Cash and cash equivalents                                                               $ 2,087,608   $ 1,458,896
   Trading securities                                                                               --    17,982,830
   Trade accounts receivable, net of allowance for doubtful
            accounts of $572,853 in 2001 and $1,909,069 in 2000                             10,678,214    11,357,522
   Income taxes refundable                                                                   1,108,007     1,162,118
   Other receivables                                                                           371,656       362,000
   Due from employees, net of allowance for uncollectible
            advances of $70,000 in 2001                                                         35,018         2,890
   Inventories                                                                              14,084,931     7,572,153
   Prepaid expenses                                                                            185,831       112,794
   Deferred income taxes                                                                       260,709       959,665
                                                                                           -----------   -----------

                   Total current assets                                                     28,811,974    40,970,868

Other assets                                                                                   367,469       261,937
Property and equipment, net                                                                 12,685,053    11,455,372
Deferred income taxes                                                                          933,801            --
                                                                                           -----------   -----------

                   Total assets                                                            $42,798,297   $52,688,177
                                                                                           ===========   ===========
                            Liabilities and Stockholders' Equity
Current liabilities:
   Notes payable to bank                                                                   $ 8,271,000   $        --
   Accounts payable and accrued expenses                                                     5,537,313     2,479,116
   Accrued compensation and payroll taxes                                                      798,203       847,572
   Payable to investment broker related to securities trading                                       --     5,658,574
                                                                                           -----------   -----------

                   Total current liabilities                                                14,606,516     8,985,262

Other liabilities                                                                              326,553            --
Deferred income taxes                                                                               --       195,085
                                                                                           -----------   -----------

                   Total liabilities                                                        14,933,069     9,180,347
                                                                                           -----------   -----------
Stockholders' equity:
   Preferred stock, no par value, authorized 1,000,000 shares;
            none issued and outstanding                                                             --            --
   Common stock, no par value, authorized 100,000,000
            shares; issued and outstanding 55,431,279 shares in 2001
            and 56,391,993 shares in 2000                                                           --     6,893,579
   Retained earnings                                                                        27,865,228    36,614,251
                                                                                           -----------   -----------

                   Total stockholders' equity                                               27,865,228    43,507,830

Commitments and contingencies
                                                                                           -----------   -----------

                   Total liabilities and stockholders' equity                              $42,798,297   $52,688,177
                                                                                           ===========   ===========
</TABLE>

See accompanying notes to financial statements.

                                      32
<PAGE>

                           OPTICAL CABLE CORPORATION
                           Statements of Operations
                  Years Ended October 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                          Years Ended October 31,
                                                                               --------------------------------------------
                                                                                   2001            2000            1999
                                                                               ------------    ------------    ------------
<S>                                                                            <C>             <C>             <C>
Net sales                                                                      $ 60,405,437    $ 58,218,994    $ 50,698,637
Cost of goods sold                                                               35,983,719      30,877,688      27,547,022
                                                                               ------------    ------------    ------------

                   Gross profit                                                  24,421,718      27,341,306      23,151,615

Selling, general and administrative expenses                                     17,130,704      15,024,198      10,798,643
                                                                               ------------    ------------    ------------

                   Income from operations                                         7,291,014      12,317,108      12,352,972

Other income (expense):
    Gains (losses) on trading securities, net                                   (11,414,151)        288,667              --
    Interest income                                                                  45,620         230,038         201,708
    Interest expense                                                               (363,417)        (57,084)             --
    Other, net                                                                        9,201         (45,015)        (35,944)
                                                                               ------------    ------------    ------------

                   Other income (expense), net                                  (11,722,747)        416,606         165,764
                                                                               ------------    ------------    ------------
                   Income (loss) before income
                    tax expense                                                  (4,431,733)     12,733,714      12,518,736

Income tax expense                                                                2,297,466       4,478,656       4,214,096
                                                                               ------------    ------------    ------------

                   Net income (loss)                                           $ (6,729,199)   $  8,255,058    $  8,304,640
                                                                               ============    ============    ============

Net income (loss) per share:
    Basic and diluted                                                          $      (0.12)   $       0.15    $       0.15
                                                                               ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      33
<PAGE>

                           OPTICAL CABLE CORPORATION
                      Statements of Stockholders' Equity
                  Years Ended October 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                   Total
                                                       Common Stock              Retained      Stockholders'
                                               ----------------------------
                                                  Shares          Amount         Earnings         Equity
                                               ------------    ------------    ------------    ------------
<S>                                            <C>             <C>            <C>              <C>
Balances at October 31, 1998                     56,818,554    $  9,936,640    $ 20,054,553    $ 29,991,193

Exercise of employee stock
    options ($1.67 per share)                       119,700         199,500              --         199,500
Tax benefit of disqualifying
    disposition of stock options exercised               --         209,207              --         209,207
Repurchase of common stock (at cost)               (816,847)     (5,857,465)             --      (5,857,465)
Net income                                               --              --       8,304,640       8,304,640
                                               ------------    ------------    ------------    ------------

Balances at October 31, 1999                     56,121,407       4,487,882      28,359,193      32,847,075

Exercise of employee stock
    options ($3.86 per share)                       268,336       1,036,916              --       1,036,916
Restricted stock award ($6.25 per share)              2,250          14,063              --          14,063
Tax benefit of disqualifying
    disposition of stock options exercised               --       1,354,718              --       1,354,718
Net income                                               --              --       8,255,058       8,255,058
                                               ------------    ------------    ------------    ------------

Balances at October 31, 2000                     56,391,993       6,893,579      36,614,251      43,507,830

Exercise of employee stock
    options ($2.07 per share)                       142,436         295,261              --         295,261
Restricted stock award ($6.25 per share)                750           4,687              --           4,687
Stock-based compensation                                 --           5,593              --           5,593
Tax benefit of disqualifying
    disposition of stock options exercised               --          62,749              --          62,749
Repurchase of common stock (at cost)             (1,103,900)     (7,261,869)     (2,019,824)     (9,281,693)
Net loss                                                 --              --      (6,729,199)     (6,729,199)
                                               ------------    ------------    ------------    ------------

Balances at October 31, 2001                     55,431,279    $         --    $ 27,865,228    $ 27,865,228
                                               ============    ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      34
<PAGE>

                           OPTICAL CABLE CORPORATION
                           Statements of Cash Flows
                  Years Ended October 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                       Years Ended October 31,
                                                                            --------------------------------------------
                                                                                2001            2000            1999
                                                                            ------------    ------------    ------------
<S>                                                                        <C>              <C>             <C>
Cash flows from operating activities (including securities trading):
  Net income (loss)                                                         $ (6,729,199)   $  8,255,058    $  8,304,640
  Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities:
    Depreciation and amortization                                              1,058,489         841,646         764,652
    Bad debt expense                                                           1,052,447       2,018,128          87,490
    Deferred income tax expense (benefit)                                       (429,930)       (737,717)         67,754
    Loss on disposal of property and equipment                                        --           7,807              --
    Tax benefit of disqualifying disposition of stock options exercised           62,749       1,354,718         209,207
    Stock-based compensation expense                                              10,280          14,063              --
    Unrealized losses on trading securities, net                                      --         499,755              --
    (Increase) decrease in trading securities                                 17,982,830     (18,482,585)             --
    Increase (decrease) in payable to investment broker
     related to securities trading                                            (5,658,574)      5,658,574              --
    (Increase) decrease in:
     Trade accounts receivable (before bad debt expense)                        (303,139)     (3,051,328)       (417,913)
     Income taxes refundable                                                      54,111      (1,162,118)             --
     Other receivables                                                            (9,656)        (81,781)         14,980
     Due from employees                                                         (102,128)          5,210          (2,511)
     Inventories                                                              (6,512,778)      1,182,270       1,212,589
     Prepaid expenses                                                            (73,037)         (6,258)        (10,770)
    Increase (decrease) in:
     Accounts payable and accrued expenses and other liabilities               3,578,276      (1,053,960)      1,328,540
     Accrued compensation and payroll taxes                                      (49,369)        154,894          36,650
     Income taxes payable                                                             --        (421,803)        310,354
                                                                            ------------    ------------    ------------
        Net cash provided by (used in) operating activities
         (including securities trading)                                        3,931,372      (5,005,427)     11,905,662
                                                                            ------------    ------------    ------------
Cash flows from investing activities:
  Purchase of property and equipment                                          (2,481,696)     (1,298,717)       (400,714)
  Increase in cash surrender value of life insurance                            (105,532)        (90,554)       (171,382)
  Advances on note receivable from former officer                                500,000              --              --
  Collection from note receivable from former officer                           (500,000)             --              --
  Collection from note receivable                                                     --              --          18,800
                                                                            ------------    ------------    ------------

        Net cash used in investing activities                                 (2,587,228)     (1,389,271)       (553,296)
                                                                            ------------    ------------    ------------
Cash flows from financing activities:
  Repurchase of common stock                                                  (9,281,693)             --      (5,857,465)
  Proceeds from exercise of employee stock options                               295,261       1,036,916         199,500
  Proceeds from notes payable to bank, net                                     8,271,000              --              --
                                                                            ------------    ------------    ------------

        Net cash provided by (used in) financing activities                     (715,432)      1,036,916      (5,657,965)
                                                                            ------------    ------------    ------------
Net increase (decrease) in cash and cash equivalents                             628,712      (5,357,782)      5,694,401

Cash and cash equivalents at beginning of year                                 1,458,896       6,816,678       1,122,277
                                                                            ------------    ------------    ------------

Cash and cash equivalents at end of year                                    $  2,087,608    $  1,458,896    $  6,816,678
                                                                            ============    ============    ============
Supplemental disclosure of cash flow information:

  Cash payments for interest                                                $    320,750    $     57,084    $         --
                                                                            ============    ============    ============
  Income taxes paid                                                         $  2,610,536    $  5,445,576    $  3,615,300
                                                                            ============    ============    ============
  Noncash investing and financing activities:

   Capital expenditures accrued in accounts payable                         $     58,650    $    252,176    $     89,344
                                                                            ============    ============    ============
   Trade accounts receivable financed as note receivable                    $         --    $         --    $    112,405
                                                                            ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      35
<PAGE>

                           OPTICAL CABLE CORPORATION
                         Notes to Financial Statements
                  Years Ended October 31, 2001, 2000 and 1999


(1)  Description of Business and Summary of Significant Accounting Policies

     (a)  Description of Business

          Optical Cable Corporation (the "Company") manufactures and markets a
          broad range of tight-buffered fiber optic cables for high bandwidth
          transmission of data, video and audio communications over short to
          moderate distances. The Company utilizes a tight-buffer coating
          process that protects each optical fiber. The Company's fiber optic
          cables are sold nationwide and in over 65 foreign countries. Also see
          note 8.

     (b)  Cash and Cash Equivalents

          The Company maintains its primary cash accounts at two commercial
          banks located in Virginia. Accounts in these banks are insured by the
          Federal Deposit Insurance Corporation (FDIC) up to $100,000. As of
          October 31, 2001, the Company had bank deposits in excess of $100,000
          totaling $1,795,243. As of October 31, 2000, the Company had no
          domestic bank deposits in excess of $100,000.

          As of October 31, 2000, cash equivalents consist of $1,171,777 of
          overnight repurchase agreements. As of October 31, 2001, the Company
          had no cash equivalents. For purposes of the statements of cash flows,
          the Company considers all highly liquid debt instruments with original
          maturities of three months or less to be cash equivalents.

     (c)  Trading Securities

          Trading securities were recorded at fair value, which was based on
          quoted market prices. Purchases and sales of trading securities were
          recognized on a trade-date basis, the date the order to buy or sell
          was executed. The Company's trading securities were bought and held
          principally for the purpose of selling them in the near term. In
          addition to realized gains and losses, unrealized holding gains and
          losses for trading securities were included in net income. The amount
          of net unrealized holding loss that was included in net income for the
          year ended October 31, 2000 was $499,755. Net realized gains or losses
          were determined on the first-in, first-out cost method. As of October
          31, 2000, the Company's trading securities consisted of shares in the
          Nasdaq 100 Trust, which is designed to closely track the price and
          yield performance of the Nasdaq stock index.

          As of October 31, 2000, the Company had short-term margin borrowings
          of $5,658,574 payable to an investment broker related to the trading
          securities. The margin account incurred interest at rates ranging from
          the Call Money rate plus .025% to the Call Money rate plus 2.50%,
          depending on the outstanding balance of margin borrowings (8.50% as of
          October 31, 2000). Obligations of the Company to the investment broker
          were collateralized by the trading securities and were subject to
          margin provisions, which could have resulted in the sale of some or
          all of the trading securities to meet margin calls.

                                      36
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

          In fiscal year 2000, the Company recognized realized and unrealized
          net gains on trading securities of $288,667 and incurred interest
          expense on margin borrowings of $57,084. Subsequent to October 31,
          2000, the Company continued to purchase and sell shares in the Nasdaq
          100 Trust and during this period, the fair value of those shares
          continued to decline substantially resulting in the sale of some of
          the trading securities to meet margin calls. The Company's last
          purchase of shares in the Nasdaq 100 Trust was on May 14, 2001. On
          October 3, 2001, the Company sold all of its remaining investment in
          the Nasdaq 100 Trust and paid off the outstanding margin borrowings as
          part of a policy to invest future excess funds only in short-term
          interest-bearing investments. In fiscal year 2001, the Company
          recognized realized net losses on trading securities of $11,414,151
          and incurred interest expense on margin borrowings of $304,595.

     (d)  Inventories

          Inventories of raw materials and production supplies are stated at the
          lower of cost (specific identification for optical fibers and first-
          in, first-out for other raw materials and production supplies) or
          market. Inventories of work in process and finished goods are stated
          at average cost, which includes raw materials, direct labor and
          manufacturing overhead. Also see note 3.

     (e)  Property and Equipment

          Property and equipment are stated at cost. Depreciation and
          amortization are provided for using both straight-line and declining
          balance methods over the estimated useful lives of the assets.
          Estimated useful lives are thirty-nine years for buildings and
          improvements and five to seven years for machinery and equipment and
          furniture and fixtures. Also see note 4.

     (f)  Revenue Recognition

          Revenue is recognized at the time of product shipment or delivery to
          the customer, and the customer takes ownership and assumes risk of
          loss based on shipping terms.

     (g)  Shipping and Handling Costs

          Shipping and handling costs include the costs incurred to physically
          move finished goods from the Company's warehouse to the customers
          designated location and the costs to store, move and prepare the
          finished goods for shipment. All amounts billed to a customer in a
          sale transaction related to shipping and handling are classified as
          sales revenue. Shipping and handling costs of approximately
          $2,155,000, $1,948,000 and $1,425,000 are included in selling, general
          and administrative expenses for the years ended October 31, 2001, 2000
          and 1999, respectively.

     (h)  Income Taxes

          Income taxes are accounted for under the asset and liability method.
          Deferred tax assets and liabilities are recognized for the future tax
          consequences attributable to differences between the financial
          statement carrying amounts of existing assets and liabilities and
          their respective tax

                                      37
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999


          bases and operating loss, capital loss and tax credit carryforwards.
          Deferred tax assets and liabilities are measured using enacted tax
          rates expected to apply to taxable income in the years in which those
          temporary differences are expected to be recovered or settled. The
          effect on deferred tax assets and liabilities of a change in tax rates
          is recognized in income in the period that includes the enactment
          date. Also see note 9.

     (i)  Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
          Of

          The Company reviews long-lived assets and certain identifiable
          intangibles for impairment whenever events or changes in circumstances
          indicate that the carrying amount of an asset may not be recoverable.
          Recoverability of assets to be held and used is measured by a
          comparison of the carrying amount of an asset to future undiscounted
          net cash flows expected to be generated by the asset. If such assets
          are considered to be impaired, the impairment to be recognized is
          measured by the amount by which the carrying amount of the assets
          exceed the fair value of the assets. Assets to be disposed of are
          reported at the lower of the carrying amount or fair value less costs
          to sell.

     (j)  Stock Option Plan

          The Company applies the intrinsic value-based method of accounting
          prescribed by Accounting Principles Board ("APB") Opinion No. 25,
          Accounting for Stock Issued to Employees, and related interpretations
          including Financial Accounting Standards Board ("FASB") Interpretation
          No. 44, Accounting for Certain Transactions involving Stock
          Compensation an interpretation of APB Opinion No. 25, issued in March
          2000, to account for its fixed plan stock options granted to
          employees. Under this method, compensation expense is recorded on the
          date of grant only if the current market price of the underlying stock
          exceeded the exercise price. Statement of Financial Accounting
          Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation,
          established accounting and disclosure requirements using a fair value-
          based method of accounting for stock-based employee compensation
          plans. As allowed by SFAS No. 123, the Company has elected to continue
          to apply the intrinsic value-based method of accounting described
          above, and has adopted the disclosure requirements of SFAS No. 123.
          The Company applies the provisions of SFAS No. 123 and EITF Issue No.
          96-18, Accounting for Equity Instruments That Are Issued to Other Than
          Employees for Acquiring, or in Conjunction with Selling, Goods or
          Services, for nonemployee stock option grants. Also see note 7.

     (k)  Net Income (Loss) Per Share

          Basic net income (loss) per share excludes dilution and is computed by
          dividing net income (loss) available to common stockholders by the
          weighted-average number of common shares outstanding for the period.
          Diluted net income (loss) per share reflects the potential dilution
          that could occur if securities or other contracts to issue common
          stock were exercised or converted into common stock or resulted in the
          issuance of common stock that then shared in the net income (loss) of
          the Company. Also see note 11.

                                      38
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       (l)    Comprehensive Income

              SFAS No. 130, Reporting Comprehensive Income, establishes
              standards for reporting and display of comprehensive income and
              its components in a full set of financial statements. Enterprises
              that have no items of other comprehensive income in any period
              presented are excluded from the scope of this Statement. The
              Company has no items of other comprehensive income in any period
              presented.

       (m)    Commitments and Contingencies

              Liabilities for loss contingencies arising from product warranties
              and defects, claims, assessments, litigation, fines and penalties
              and other sources are recorded when it is probable that a
              liability has been incurred and the amount of the assessment can
              be reasonably estimated.

       (n)    Use of Estimates

              The preparation of financial statements in conformity with
              accounting principles generally accepted in the United States of
              America requires management to make estimates and assumptions that
              affect the reported amounts of assets and liabilities and the
              disclosure of contingent assets and liabilities at the date of the
              financial statements and the reported amounts of revenues and
              expenses during the reporting period. Actual results could differ
              from these estimates.

       (o)    Reclassifications

              Certain reclassifications have been made to the prior years'
              financial statements to place them on a basis comparable with the
              current year's financial statements.


(2)    Allowance for Doubtful Accounts for Trade Accounts Receivable

       A summary of changes in the allowances for doubtful accounts for trade
       accounts receivable for the years ended October 31, 2001, 2000 and 1999
       follows:

                                                Years Ended October 31,
                                       ----------------------------------------
                                           2001           2000          1999
                                       -----------    -----------   -----------

       Balance at beginning of year    $ 1,909,069    $   316,000   $   311,500
       Bad debt expense                    982,447      2,018,128        87,490
       Losses charged to allowance      (2,327,753)      (453,049)      (84,633)
       Recoveries added to allowance         9,090         27,990         1,643
                                       -----------    -----------   -----------
       Balance at end of year          $   572,853    $ 1,909,069   $   316,000
                                       ===========    ===========   ===========


                                      39
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       One of the Company's two major distributors filed for protection from its
       creditors under bankruptcy laws in January 2001. As of October 31, 2000,
       the Company specifically reserved approximately $1,772,000 for estimated
       uncollectible accounts receivable from this distributor. As of January
       31, 2001, the Company wrote off that $1,772,000 reserve, as well as an
       additional bad debt reserve related to this distributor of approximately
       $419,000 incurred during the first quarter of fiscal year 2001, for a
       total write-off of approximately $2,191,000 for estimated uncollectible
       accounts receivable from this distributor for the year ended October 31,
       2001. There were no net sales attributed to this distributor subsequent
       to the first quarter of fiscal year 2001. Also see note 8.


(3)    Inventories

       Inventories as of October 31, 2001 and 2000 consist of the following:

                                                        October 31,
                                                --------------------------
                                                     2001          2000
                                                ------------   -----------

       Finished goods                           $  4,328,379   $   808,271
       Work in process                             3,064,975     3,487,611
       Raw materials                               6,641,985     3,194,393
       Production supplies                            49,592        81,878
                                                ------------   -----------

                                                $ 14,084,931   $ 7,572,153
                                                ============   ===========

       During fiscal year 2001, the Company entered into separate long-term
       supply agreements with two raw optical fiber suppliers. One agreement
       expires on December 31, 2003 and the other on December 31, 2004.

       The aggregate purchases related to these agreements totaled approximately
       $9.5 million for the year ended October 31, 2001. The aggregate purchases
       related to these agreements (subject to certain annual price adjustments)
       for each of the fiscal years subsequent to October 31, 2001 are
       approximated as follows:

               Fiscal Year Ending October 31,                 Amount
               ------------------------------            ----------------

               2002                                      $     12,207,000
               2003                                            14,104,000
               2004                                             8,641,000
               2005                                             1,247,000
                                                         ----------------

                   Total                                 $     36,199,000
                                                         ================

Additionally, one of the supply agreements requires that one-half of all
single-mode fiber purchases through December 31, 2004 above the committed
amounts be purchased from that supplier at market prices.


                                      40
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

(4)    Property and Equipment

       Property and equipment as of October 31, 2001 and 2000 consists of the
following:

<TABLE>
<CAPTION>
                                                                    October 31,
                                                            --------------------------
                                                                 2001          2000
                                                            ------------  ------------
       <S>                                                  <C>           <C>
       Land                                                 $  2,745,327  $  2,745,327
       Building and improvements                               6,896,842     6,896,842
       Machinery and equipment                                 8,193,773     6,676,960
       Furniture and fixtures                                    794,418       735,052
       Construction in progress                                  948,062       236,071
                                                            ------------  ------------

                 Total property and equipment, at cost        19,578,422    17,290,252

       Less accumulated amortization and depreciation         (6,893,369)   (5,834,880)
                                                            ------------  ------------

                 Property and equipment, net                $ 12,685,053  $ 11,455,372
                                                            ============  ============
</TABLE>

       As of October 31, 2001, construction in progress represents machinery and
       equipment purchased for expansion in 2001, which is ready for service but
       has not yet been placed into service due to a reduction in product
       demand.

(5)    Notes Payable to Bank

       Under a loan agreement with its bank dated March 10, 1999, the Company
       had a $5 million secured revolving line of credit and a $10 million
       secured revolving line of credit.  The lines of credit are subject to
       certain restrictive covenants with the bank. During fiscal year 2001, the
       Company violated certain restrictive covenants. Effective October 30,
       2001, the bank waived the Company's defaults under the loan agreement,
       amended the loan agreement and reduced the $10 million line of credit to
       $4.5 million for a maximum combined availability of $9.5 million. As of
       October 31, 2001, the Company had combined outstanding borrowings under
       these lines of credit in the amount of $8,271,000, with $1,229,000 unused
       and available. As of October 31, 2000, no borrowings were outstanding
       under these lines of credit.

       The lines of credit bear interest at 1.50% above the monthly LIBOR rate
       (3.79% as of October 31, 2001 and 8.12% as of October 31, 2000) and are
       equally and ratably collateralized by the Company's accounts receivable,
       contract rights, inventory, furniture and fixtures, machinery and
       equipment and general intangibles. The lines of credit have been extended
       and will expire on March 31, 2002, unless they are further renewed or
       extended. While the lines of credit do not require a compensating balance
       that legally restricts the use of cash amounts, at the bank's request,
       the Company has agreed to maintain an unrestricted target cash balance of
       $125,000.

                                      41
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999


     The Company is seeking to obtain $15 to $20 million in new credit (part
     revolving line of credit and part term loan) to be collateralized by all of
     the assets of the Company. This planned credit facility would replace the
     current credit facilities described above.


(6)  Related Party Transactions

     Since February 1, 1995, the Company had entered into employment agreements
     with the individual who was the Company's former Chairman, President and
     Chief Executive Officer and its previously sole stockholder, which
     typically had a term of less than two years. Annual compensation under the
     agreements consisted of a base salary equal to one percent of the previous
     fiscal year's net sales and a sales commission or incentive bonus of one
     percent of any increase between the current fiscal year's net sales and the
     prior fiscal year's net sales. The Company calculated and paid this
     individual's incentive bonus on a monthly basis by comparing the prior
     month's net sales with the net sales for the corresponding month in the
     prior fiscal year. Such calculations were not cumulative, so, depending on
     monthly net sales fluctuations during any given fiscal year, the individual
     might receive monthly incentive bonuses with respect to net sales increases
     in certain months even though annual cumulative net sales decreased when
     compared to the prior fiscal year. Compensation under this arrangement,
     which terminated on October 31, 2001, amounted to $681,546, $586,981 and
     $539,997 for the years ended October 31, 2001, 2000 and 1999, respectively.

     On December 3, 2001, the Company issued a press release that announced
     that, upon the recommendation of the independent Special Committee of its
     Board of Directors (the "Special Committee"), the Board of Directors had
     removed this individual as the Company's Chairman, President and Chief
     Executive Officer. Also see note 13.

     During the year ended October 31, 2001, the Company paid $90,000 to
     Serendipity Motorsports, a company owned by the daughter of the Company's
     former Chairman, President and Chief Executive Officer. The payments were
     for the sponsorship of a NASCAR Goody's Dash Series Team involving a race
     car driven by the daughter.


(7)  Employee Benefits

     Through December 31, 2000, the Company maintained an independently
     administered self-insurance program that provided health insurance coverage
     for employees and their dependents on a cost-reimbursement basis. Under the
     program, the Company was obligated for claims payments. Effective January
     1, 2001, the Company no longer independently administers the health
     insurance coverage, but has contracted for insurance coverage with a third-
     party administrator. During the years ended October 31, 2001, 2000 and
     1999, total expense of $1,682,107, $925,347 and $837,488,

                                      42
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       respectively, was incurred under the Company's current insured and
       previous self-insured health care program.

       Effective January 1, 1994, the Company adopted a 401(k) retirement
       savings plan. To become eligible for the plan, an employee must complete
       at least six months of service and be at least 21 years of age. Employees
       are eligible to enter the plan on January 1 or July 1 each year. The plan
       allows participants to contribute through salary reduction up to 7% of
       their annual compensation on a pretax basis. Company matching
       contributions are two dollars for every one dollar contributed by an
       employee up to 4% of the employees' annual compensation. The Company made
       matching contributions to the plan of $454,825, $406,934 and $365,887 for
       the years ended October 31, 2001, 2000 and 1999, respectively.

       The Company and its previously sole stockholder adopted on March 1, 1996
       a stock incentive plan which is called the Optical Cable Corporation 1996
       Stock Incentive Plan (the "Plan"). The Plan is intended to provide a
       means for employees to increase their personal financial interest in the
       Company, thereby stimulating the efforts of these employees and
       strengthening their desire to remain with the Company through the use of
       stock incentives. The Company has reserved 6,000,000 shares of common
       stock for issuance pursuant to incentive awards under the Plan. As of
       October 31, 2001, there were 4,986,438 additional shares available for
       grant under the Plan. The options have terms ranging from 5.41 to 10
       years, and generally vest 25% after two years, 50% after three years, 75%
       after four years and 100% after five years, with certain option grants
       vesting in equal monthly installments over four years.

       The per share weighted-average estimated fair value of stock options
       granted during 2001 was $4.22 on the date of grant using the
       Black-Scholes option-pricing model with the following weighted-average
       assumptions: no expected cash dividend yield, risk-free interest rate of
       5.57%, expected volatility of 106.8% and an expected life of 4.87 years.
       No new stock options were granted during the fiscal years ended October
       31, 2000 and 1999; however, certain replacement options were granted as
       further described below.

       The Company applies APB Opinion No. 25 in accounting for its Plan and,
       accordingly, no compensation cost has been recognized for its stock
       options granted to employees in the financial statements. Had
       compensation cost for the Company's Plan been determined consistent with
       SFAS No. 123, the Company's net income (loss) and net income (loss) per
       share would have been reduced to the SFAS No. 123 pro forma amounts
       indicated below:

                                              Years Ended October 31,
                                      ----------------------------------------
                                          2001          2000          1999
                                      ------------   -----------   -----------
       Net income (loss):
         As reported                  $ (6,729,199)  $ 8,255,058   $ 8,304,640
                                      ============   ===========   ===========

         Pro forma                    $ (7,295,776)  $ 7,911,830   $ 7,961,412
                                      ============   ===========   ===========

                                       43
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

                                              Years Ended October 31,
                                      ----------------------------------------
                                          2001          2000          1999
                                      ------------   -----------   -----------
       Net income (loss) per share:
         Basic:
            As reported               $      (0.12)  $      0.15   $      0.15
                                      ============   ===========   ===========

            Pro forma                 $      (0.13)  $      0.14   $      0.14
                                      ============   ===========   ===========

         Diluted:
            As reported               $      (0.12)  $      0.15   $      0.15
                                      ============   ===========   ===========

            Pro forma                 $      (0.13)  $      0.14   $      0.14
                                      ============   ===========   ===========

       Stock option activity for the years ended October 31, 2001, 2000 and 1999
is as follows:

<TABLE>
<CAPTION>
                                                                  Number of       Weighted-Average
                                                                    Shares         Exercise Price
                                                                  ---------       ----------------
<S>                                                               <C>             <C>
       Balance at October 31, 1998                                  853,725       $           3.97

         Replacement options issued                                   3,449                   7.25
         Exercised                                                 (119,700)                  1.67
         Forfeited                                                  (26,250)                  5.94
                                                                  ---------

       Balance at October 31, 1999                                  711,224                   4.28

         Replacement options issued                                   1,500       $           7.25
         Exercised                                                 (268,336)                  3.86
         Forfeited                                                  (15,389)                  6.02
                                                                  ---------

       Balance at October 31, 2000                                  428,999                   4.53

         Granted                                                    750,000       $           7.54
         Exercised                                                 (142,436)                  2.07
         Forfeited                                                  (23,001)                 10.26
                                                                  ---------
       Balance at October 31, 2001, (283,562 options
         exercisable; 83,200 options at exercise
         price of $1.67 per share with remaining
         contractual life of 4.5 years, and 200,362
         options at exercise price of $7.42 per share
         with remaining contractual life of 4.5 years)            1,013,562       $           6.97
                                                                  =========
</TABLE>

       Included in the 750,000 options granted during the fiscal year ended
       October 31, 2001 were 100,000 options to nonemployee sales
       representatives. The Company recorded compensation expense of $5,593
       related to these options for the fiscal year ended October 31, 2001.

       No new stock options were granted during the fiscal years ended October
       31, 2000 and 1999. However, prior stock options granted have a
       replacement feature contained in the original terms of the award, whereby
       the participant automatically receives a replacement option to purchase
       additional shares of the Company's common stock equal to the number of
       shares surrendered, if any, to the Company by the participant in payment
       of the exercise price with respect to stock options exercised.

                                      44
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999



     Replacement options were issued under this replacement feature during the
     fiscal years ended October 31, 2000 and 1999.

     Subsequent to October 31, 2001, the Board of Directors approved grants of
     stock options for a total of 250,000 shares effective November 16, 2001
     under the Company's 1996 Stock Incentive Plan. The per share exercise price
     of $1.25 associated with these stock options was equal to the closing price
     of the Company's common stock on the date of grant.

(8)  Business and Credit Concentrations, Major Customers and Geographic
     Information

     On November 1, 1998, the Company adopted SFAS No. 131, Disclosures about
     Segments of an Enterprise and Related Information. SFAS No. 131 establishes
     standards for the way public business enterprises are to report information
     about operating segments in annual financial statements and requires those
     enterprises to report selected information about operating segments in
     interim financial reports. It also establishes standards for related
     disclosures about products and services, geographic areas and major
     customers.

     The Company has a single reportable segment for purposes of segment
     reporting pursuant to SFAS No. 131. In addition, the Company's fiber optic
     cable products are similar in nature. Therefore, the Company has disclosed
     enterprise-wide information about geographic areas and major customers
     below in accordance with the provisions of SFAS No. 131.

     The Company provides credit, in the normal course of business, to various
     commercial enterprises, governmental entities and not-for-profit
     organizations. Concentration of credit risk with respect to trade
     receivables is limited due to the Company's large number of customers. The
     Company also manages exposure to credit risk through credit approvals,
     credit limits and monitoring procedures. Management believes that credit
     risks as of October 31, 2001 and 2000 have been adequately provided for in
     the financial statements. As of October 31, 2001 and 2000, there were no
     significant amounts receivable from any one customer other than those
     described below.

     For the year ended October 31, 2001, 13.6% or approximately $8,213,000 of
     net sales were attributable to one major domestic distributor. Subsequent
     to October 31, 2001, this distributor advised the Company that it will no
     longer stock the Company's product line as part of its regular product
     offering. The related trade accounts receivable for this distributor as of
     October 31, 2001 totaled approximately $1,916,000. No single customer or
     other distributor accounted for more than 10% of net sales for the year
     ended October 31, 2001. As of October 31, 2001, no single customer or other
     distributor had an outstanding balance payable to the Company in excess of
     5% of total stockholders' equity.

     For the year ended October 31, 2000, 28.0% or approximately $16,241,000 of
     net sales were attributable to two major domestic distributors (12.5% or
     approximately $7,246,000 to one of these major distributors and 15.5% or
     approximately $8,995,000 to the other major distributor that filed for
     protection from its creditors under the bankruptcy laws in January 2001).
     The combined related trade accounts receivable for these distributors as of
     October 31, 2000 totaled approximately $3,468,000. The Company specifically
     reserved $1,772,000 for estimated uncollectible accounts receivable from

                                      45
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       one of these major distributors that filed for protection from its
       creditors under the bankruptcy laws in January 2001 (see note 2). No
       single customer or other distributor accounted for more than 10% of net
       sales for the year ended October 31, 2000. As of October 31, 2000, no
       single customer or other distributor had an outstanding balance payable
       to the Company in excess of 5% of total stockholders' equity.

       For the year ended October 31, 1999, 30.6% or approximately $15,513,000
       of net sales were attributable to two major domestic distributors (15.8%
       or approximately $8,002,000 to one of these major distributors and 14.8%
       or approximately $7,511,000 to the other major distributor that filed for
       protection from its creditors under the bankruptcy laws in January 2001).
       The combined related trade accounts receivable for these distributors as
       of October 31, 1999 totaled approximately $3,294,000. No single customer
       or other distributor accounted for more than 10% of net sales for the
       year ended October 31, 1999. As of October 31, 1999, no single customer
       or other distributor had an outstanding balance payable to the Company in
       excess of 5% of total stockholders' equity.

       For the years ended October 31, 2001, 2000 and 1999, approximately 77%,
       79% and 80%, respectively, of net sales were from customers located in
       the United States, while approximately 23%, 21% and 20% , respectively,
       were from international customers. Net sales attributable to the United
       States and other foreign countries for the years ended October 31, 2001,
       2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                                             Years Ended October 31,
                                                                 -----------------------------------------------
                                                                      2001            2000              1999
                                                                 -------------    ------------     -------------
       <S>                                                       <C>              <C>              <C>
       United States                                             $  46,342,042    $ 45,878,300     $  40,687,466
       Australia                                                       828,006         801,641           702,780
       Brazil                                                          877,559         924,122           741,962
       Canada                                                        2,564,758       1,808,469         1,756,928
       England                                                       1,404,508       1,163,587           694,680
       Japan                                                         1,040,509         871,423           740,987
       Other foreign countries                                       7,348,055       6,771,452         5,373,834
                                                                 -------------    ------------     -------------

               Total net sales                                   $  60,405,437    $ 58,218,994     $  50,698,637
                                                                 =============    ============     =============
</TABLE>

       None of the Company's long-lived assets are located outside the United
       States.

(9)    Income Taxes

       Total income taxes for the years ended October 31, 2001, 2000 and 1999
       were allocated as follows:

<TABLE>
<CAPTION>
                                                                             Years Ended October 31,
                                                                 -----------------------------------------------
                                                                      2001            2000              1999
                                                                 -------------    ------------     -------------
       <S>                                                       <C>              <C>              <C>
       Income from continuing operations                         $   2,297,466    $  4,478,656     $   4,214,096
       Stockholders' equity, for disqualifying disposition
           of stock options exercised                                  (62,749)     (1,354,718)         (209,207)
                                                                 -------------    ------------     -------------

                                                                 $   2,234,717    $  3,123,938     $   4,004,889
                                                                 =============    ============     =============
</TABLE>

                                      46
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       Income tax expense (benefit) attributable to income from continuing
       operations for the years ended October 31, 2001, 2000 and 1999 consists
       of:

<TABLE>
<CAPTION>

Fiscal Year Ended October 31, 2001                              Current          Deferred            Total
- ----------------------------------                           --------------    --------------    --------------
<S>                                                        <C>                <C>                <C>
U.S. Federal                                               $   2,458,680      $    (381,647)    $   2,077,033
State                                                            268,716            (48,283)          220,433
                                                             --------------    --------------    --------------
               Totals                                      $   2,727,396      $    (429,930)    $   2,297,466
                                                             ==============    ==============    ==============

Fiscal Year Ended October 31, 2000                               Current          Deferred            Total
- ----------------------------------                            -------------     -------------    --------------

U.S. Federal                                               $   4,667,627      $    (658,506)    $   4,009,121
State                                                            548,746            (79,211)          469,535
                                                              -------------     -------------    --------------
               Totals                                      $   5,216,373      $    (737,717)    $   4,478,656
                                                              =============     =============    ==============

Fiscal Year Ended October 31, 1999                               Current          Deferred            Total
- ----------------------------------                            -------------     -------------    --------------

U.S. Federal                                               $   3,729,606      $      60,479     $   3,790,085
State                                                            416,736              7,275           424,011
                                                              -------------     -------------    --------------
               Totals                                      $   4,146,342      $      67,754     $   4,214,096
                                                              =============     =============    ==============
</TABLE>

Reported income tax expense for the years ended October 31, 2001, 2000 and 1999
differs from the "expected" tax expense (benefit), computed by applying the U.S.
Federal statutory income tax rate of 35% to income (loss) before income tax
expense, as follows:

<TABLE>
<CAPTION>
                                                                              Years Ended October 31,
                                                                --------------------------------------------------
                                                                    2001              2000              1999
                                                                --------------    --------------     -------------
<S>                                                             <C>               <C>               <C>
"Expected" tax expense (benefit)                              $  (1,551,107)     $  4,456,800       $ 4,381,558
Increase (reduction) in income tax expense resulting from:
    Benefits from Extraterritorial Income Exclusion
       and Foreign Sales Corporation                               (155,846)         (201,098)         (326,662)
    State income taxes, net of federal benefit (expense)           (145,804)          295,853           254,359
    Increase in the valuation allowance for deferred tax
       assets                                                     4,059,822                --                --
    Other differences, net                                           90,401           (72,899)          (95,159)
                                                                --------------    --------------     -------------
                   Reported income tax expense                $   2,297,466      $  4,478,656       $ 4,214,096
                                                                ==============    ==============     =============
</TABLE>

                                      47
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

The significant components of deferred income tax expense (benefit) attributable
to income from continuing operations for the years ended October 31, 2001, 2000
and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                             Years Ended October 31,
                                                                --------------------------------------------------
                                                                    2001              2000              1999
                                                                --------------   ---------------   ---------------
<S>                                                             <C>              <C>               <C>
Deferred tax expense (benefit) (exclusive of the
    effects of the other component below)                       $  (4,489,752)   $     (737,717)   $      67,754
Increase in the valuation allowance for deferred
    tax assets                                                      4,059,822                --               --
                                                                 ------------     -------------     ------------
                                                                $    (429,930)   $     (737,717)   $      67,754
                                                                 ============     =============     ============
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the Company's deferred tax assets and deferred tax liabilities as of October
31, 2001 and 2000 are presented below:


<TABLE>
<CAPTION>
                                                                                            October 31,
                                                                                  -------------------------------
                                                                                      2001             2000
                                                                                  --------------   --------------
<S>                                                                               <C>              <C>
Deferred tax assets:
    Accounts receivable, due to allowance for doubtful accounts and
       allowance for sales returns                                                 $   561,400      $   718,312
    Inventories, due to allowance for damaged and slow-moving
       inventories and additional costs inventoried for tax purposes
       pursuant to the Tax Reform Act of 1986                                          527,770           66,070
    Self-insured health care costs, due to accrual for financial reporting
       purposes                                                                             --           44,780
    Compensated absences due to accrual for financial reporting purposes                48,118           49,594
    Capital loss carryforward and unrealized net loss on trading securities          4,059,822          187,368
    Liabilities recorded for loss contingencies, deductible for tax purposes
       when paid                                                                       413,002               --
    Other                                                                                2,042            4,205
                                                                                    ----------       ----------

                   Total gross deferred tax assets                                   5,612,154        1,070,329
    Less valuation allowance                                                        (4,059,822)              --
                                                                                    ----------       ----------

                   Net deferred tax assets                                           1,552,332        1,070,329
Deferred tax liabilities:
    Plant and equipment, due to differences in depreciation and capital
                                                                                      (222,130)        (195,085)
    Other receivables, due to accrual for financial reporting purposes                (135,692)        (110,664)
                                                                                    ----------       ----------

                   Total gross deferred tax liabilities                               (357,822)        (305,749)
                                                                                    ----------       ----------

                   Net deferred tax asset                                          $ 1,194,510      $   764,580
                                                                                    ==========       ==========
</TABLE>

As of October 31, 2001, the Company has assessed the realizability of its
deferred tax asset relating to the capital loss carryforward generated by the
sale of the Company's trading securities during the fiscal year ended October
31, 2001. The Company has determined that it is more likely than not that this
deferred tax asset totaling $4,059,822 as of October 31, 2001, will not be
realized. In addition, the capital loss carryforward may be limited due to
certain stock ownership changes. Accordingly, the

                                      48
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

     Company has established a valuation allowance for deferred tax assets in
     the amount of $4,059,822 as of October 31, 2001, which is included in
     income tax expense for the fiscal year ended October 31, 2001. In order to
     fully realize this deferred tax asset, the Company would need to generate
     future taxable capital gains of approximately $11.1 million prior to the
     expiration of the capital loss carryforward in 2006.

     Based on the Company's historical and projected pretax earnings, management
     believes that it is more likely than not that the Company's other deferred
     tax assets will be realized.


(10) Fair Value of Financial Instruments

     The carrying amounts reported in the balance sheet for cash, cash
     equivalents, trade accounts receivable, other receivables, notes payable to
     bank, accounts payable and accrued expenses, and payable to investment
     broker related to securities trading approximate fair value because of the
     short maturity of these instruments. For trading securities, fair value was
     based on quoted market prices. The fair value for other noncurrent
     liabilities is estimated by discounting the future cash flows at an
     estimated interest rate of similar instruments of comparable maturities and
     approximates the carrying amount reported in the balance sheet.


(11) Net Income (Loss) Per Share

     The following is a reconciliation of the numerators and denominators of the
     net income (loss) per share computations for the periods presented:

<TABLE>
<CAPTION>
                                                                   Net Loss            Shares          Per Share
Fiscal Year Ended October 31, 2001                                (Numerator)      (Denominator)         Amount
- ----------------------------------                               -----------       -------------     --------------
<S>                                                             <C>                <C>               <C>
Basic net loss per share                                      $   (6,729,199)         56,156,379      $       (0.12)
                                                                                                        ===========
Effect of dilutive stock options                                          --             189,638
                                                                 -----------       -------------
Diluted net loss per share                                    $   (6,729,199)         56,346,017      $       (0.12)
                                                                 ===========       =============        ===========
<CAPTION>
                                                                  Net Income            Shares           Per Share
Fiscal Year Ended October 31, 2000                                (Numerator)       (Denominator)          Amount
- ----------------------------------                               -----------       -------------       ------------
<S>                                                             <C>                <C>                <C>
Basic net income per share                                    $    8,255,058          56,306,679      $        0.15
                                                                                                       ============
Effect of dilutive stock options                                          --             451,503
                                                                 -----------       -------------
Diluted net income per share                                  $    8,255,058          56,758,182      $        0.15
                                                                 ===========       =============       ============
<CAPTION>
                                                                  Net Income            Shares           Per Share
Fiscal Year Ended October 31, 1999                                (Numerator)       (Denominator)          Amount
- ----------------------------------                               -----------       -------------       ------------
<S>                                                             <C>                <C>                 <C>
Basic net income per share                                    $    8,304,640          56,503,964      $        0.15
                                                                                                         ==========
Effect of dilutive stock options                                          --             360,933
                                                                 -----------       -------------
Diluted net income per share                                  $    8,304,640          56,864,897      $        0.15
                                                                 ===========       =============         ==========
</TABLE>

                                      49
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999


     Stock options that could potentially dilute net income (loss) per share in
     the future that were not included in the computation of diluted net income
     (loss) per share (because to do so would have been antidilutive for the
     periods presented) totaled 480,000 for the year ended October 31, 2001. No
     such antidilutive stock options existed with respect to diluted net income
     per share calculation for the years ended October 31, 2000 and 1999.


(12) Stockholders' Equity

     The Company's Board of Directors has authorized the repurchase of up to $25
     million of the Company's common stock in the open market or in privately
     negotiated transactions. Through October 31, 2001, the Company has
     repurchased 3,234,343 shares of its common stock for $24,145,368 in such
     transactions since the inception of the Company's share repurchase program
     in October 1997.

     Effective September 20, 2001, the Company ceased the repurchase of shares
     of its common stock under the share repurchase program.

     On November 2, 2001, the Board of Directors of the Company adopted a new
     Shareholder Rights Plan (the "Rights Plan") and declared a dividend of one
     preferred share purchase right (a "Right") on each outstanding share of
     common stock. Under the terms of the Rights Plan, if a person or group
     acquires 15% (or other applicable percentage, as provided in the Rights
     Plan) or more of the outstanding common stock, each Right will entitle its
     holder (other than such person or members of such group) to purchase, at
     the Right's then current exercise price, a number of shares of common stock
     having a market value of twice such price. In addition, if the Company is
     acquired in a merger or other business transaction after a person or group
     has acquired such percentage of the outstanding common stock, each Right
     will entitle its holder (other than such person or members of such group)
     to purchase, at the Right's then current exercise price, a number of the
     acquiring company's common shares having a market value of twice such
     price.

     Upon the occurrence of certain events, each Right will entitle its holder
     to buy one one-thousandth of a Series A preferred share ("Preferred
     Share"), at an exercise price of $25, subject to adjustment. Each Preferred
     Share will entitle its holder to 1,000 votes and will have an aggregate
     dividend rate of 1,000 times the amount, if any, paid to holders of common
     stock. The Rights will expire on November 2, 2011, unless the date is
     extended or unless the Rights are earlier redeemed or exchanged at the
     option of the board of directors for $.0001 per Right. Generally, each
     share of common stock issued after November 5, 2001 will have one Right
     attached. The adoption of the Rights Plan has no impact on the financial
     position or results of operations of the Company.

     The Company has reserved 100,000 of its authorized preferred stock for
     issuance upon exercise of the rights.

(13) Contingencies

     On September 27, 2000, the Equal Employment Opportunity Commission ("EEOC")
     filed a lawsuit under Title VII of the Civil Rights Act against the Company
     in the United States District Court for the Western District of Virginia.
     The lawsuit alleged a pattern or practice of discrimination on the bases of
     gender and race. The lawsuit sought injunctive and other relief and damages
     in an unspecified amount. On December 13, 2001, the parties reached an
     agreement as to the amount of a settlement (subject to final documentation
     and judicial review and approval), that affords both individual and class
     relief, without any admission of liability. Pursuant to this agreement, the
     Company wil pay $500,000 upon entry of a consent decree by the court,
     $175,000 on the first anniversary and $175,000 on the second anniversary of
     the consent decree, to satisfy any gender and race class claims; $75,000 to
     one individual specifically named in the complaint; and at least $75,000
     for the Company's planned diversity, recruitment and human resource
     management programs over the term of the consent decree.

     As a result, the Company recorded a charge in the fourth quarter of fiscal
     year 2001 in the amount of $901,553 representing $575,000 (current portion)
     payable upon entry of a consent decree by the court, as well as $326,553
     (noncurrent portion) representing the present value of two equal payments
     in the amount of $175,000 payable on the first and second anniversaries of
     the entry of a consent decree by the court. The $75,000 to be used for the
     Company's planned diversity, recruitment and human resource management
     programs will be expensed as incurred.

     The Company, the Company's former Chairman, President and Chief Executive
     Officer, and various John Does (officers and/or directors of the Company
     during the class period) were named as defendants in three class action
     lawsuits filed in the United States District Court for the Western District
     of Virginia (the "Suits"). The first class action lawsuit was filed on
     November 26, 2001, by Charles S. Farrell, Jr., on behalf of himself and
     others similarly situated. The second class action lawsuit was filed on
     December 14, 2001, by Lerner Group, on behalf of itself and others


                                      50
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999


     similarly situated. The third class action lawsuit was filed on December
     27, 2001, by Richard Simone, on behalf of himself and others similarly
     situated. In each of the substantially similar suits, the plaintiffs
     purport to represent purchasers of the Company's common stock during the
     period ranging from July 31, 2000, through October 8, 2001 (the class
     period), and allege that the Company violated federal securities laws and
     made fraudulent and/or negligent misrepresentations and/or omissions. The
     plaintiffs in each of the Suits seek compensatory and exemplary damages in
     an unspecified amount, as well as reasonable costs and expenses incurred in
     the cause of action, including attorneys' fees and expert fees.

     Management intends to vigorously defend the Suits. The Company may,
     however, incur substantial costs in defending itself against the Suits,
     regardless of their merit or outcome. At this early stage in the Suits,
     management cannot make a reasonable estimate of the monetary amount of
     their resolution or estimate a range of reasonably possible losses, if any.
     If the Company is unsuccessful, it could be subject to damages that may be
     substantial and could have a material adverse effect on the Company's
     financial position, results of operations or liquidity.

     The Company was named as a defendant in two lawsuits filed in the United
     States District Court for the Southern District of New York seeking to
     compel the Company to authorize the transfer agent to transfer
     unregistered, restricted stock on the Company's stock ledger. The first
     suit was filed on October 22, 2001, by Bear, Stearns & Co. Inc. and Bear,
     Stearns Securities Corporation (collectively, "Bear Stearns"). The second
     suit was filed on October 26, 2001, by UBS PaineWebber Inc.
     ("PaineWebber"). In each case the plaintiffs sought injunctive relief with
     respect to shares of unregistered, restricted common stock of the Company
     sold in the course of liquidating brokerage accounts or repossessed shares
     of the former Chairman, President and Chief Executive Officer to cover
     personal margin loans to him. Each of the lawsuits contains a claim for
     damages caused by the alleged wrongful refusal by the Company to authorize
     the transfers in connection with the liquidations. On October 31, 2001, the
     Court in the Bear Stearns case entered an order directing the Company to
     authorize the stock transfers sought by Bear Stearns and imposing certain
     conditions on Bear Stearns in connection with such transfers. In early
     November, the Company reached agreement with PaineWebber pursuant to which
     the Company would authorize stock transfers in connection with the
     liquidation of unregistered, restricted stock of the Company held by
     PaineWebber upon the foreclosure of a brokerage account of the former
     officer. Neither of the cases has been dismissed; however, the Company
     believes that they will be resolved without any material liability on the
     part of the Company.

     From time to time, the Company is involved in various other claims and
     legal actions arising in the ordinary course of business. In the opinion of
     management, the ultimate disposition of these matters will not have a
     material adverse effect on the Company's financial position, results of
     operations or liquidity.

(14) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
     Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
     reporting standards for derivative instruments, including certain
     derivative instruments embedded in other contracts, and for hedging
     activities. In June 1999, the FASB issued SFAS No. 137, Accounting for
     Derivative Instruments and Hedging Activities - Deferral of the Effective
     Date of FASB Statement No. 133. SFAS No. 137 defers the

                                      51
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999

       effective date of SFAS No. 133 to apply to all fiscal quarters of all
       fiscal years beginning after June 15, 2000. In June 2000, the FASB issued
       SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
       Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 138
       amends SFAS No. 133 for a limited number of issues that have caused
       application difficulties. The adoption of SFAS No. 133, as amended, as of
       November 1, 2000, did not have any effect on the financial position,
       results of operations or liquidity of the Company.

       The Company has also adopted Staff Accounting Bulletin ("SAB") No. 101,
       Revenue Recognition in Financial Statements, issued by the SEC staff.
       Given the nature of the Company's business, the adoption of SAB 101 did
       not have any effect on the financial position, results of operations or
       liquidity of the Company.


(15)   Quarterly Results of Operations (Unaudited)

       The following is a summary of the unaudited quarterly results of
       operations for the years ended October 31, 2001 and 2000:


<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                                ---------------------------------------------------------------------
Fiscal Year Ended October 31, 2001                 January 31         April 30          July 31         October 31
- ---------------------------------------         -----------------  ----------------  ---------------  ---------------
<S>                                             <C>                <C>               <C>              <C>
Net sales                                         $ 16,996,200      $ 17,376,605      $ 14,085,959    $ 11,946,673
Gross profit                                         7,878,269         7,828,473         6,105,949       2,609,027
Other expense, net                                  (4,126,783)       (5,236,430)         (616,057)     (1,743,477)
Income (loss) before income taxes                     (176,328)       (1,154,263)        1,667,039      (4,768,181)
Net income (loss)                                     (114,613)       (3,657,928)          874,943      (3,831,601)
Basic and diluted net income (loss) per share             --               (0.06)             0.02           (0.07)
</TABLE>


<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                                 -----------------------------------------------------------------
Fiscal Year Ended October 31, 2000                 January 31         April 30         July 31         October 31
- ----------------------------------               -------------     -------------    ------------     -------------
<S>                                              <C>               <C>              <C>              <C>
Net sales                                        $ 11,346,235      $13,028,310      $16,650,975      $17,193,474
Gross profit                                        5,205,115        5,909,092        7,652,197        8,574,902
Other income (expense), net                           532,545        1,386,149         (403,252)      (1,098,836)
Income before income taxes                          3,138,397        4,163,017        3,702,629        1,729,671
Net income                                          2,033,120        2,697,442        2,400,129        1,124,367
Basic and diluted net income per share                   0.04             0.05             0.04             0.02
</TABLE>


(16)   Significant Fourth Quarter Adjustments

       During the fourth quarter of fiscal year 2001, the Company recorded the
       following significant fourth quarter adjustments, which aggregate to
       approximately $5.4 million: a $901,553 charge for an anticipated
       settlement with the EEOC for alleged prior discriminatory practices, a
       $410,602 charge to

                                      52
<PAGE>

                           OPTICAL CABLE CORPORATION
                   Notes to Financial Statements (Continued)
                  Years Ended October 31, 2001, 2000 and 1999


write off deferred costs related to the aborted securities offering previously
anticipated during fiscal year 2001, a charge of approximately $1.2 million to
write down slow-moving and damaged inventory to net realizable value, a $508,225
charge to increase bad debt expense, a $1,662,657 charge to record realized
losses from the disposition of trading securities, and an increase in the
valuation allowance for deferred tax assets of approximately $687,000.

In addition, during the fourth quarter of fiscal year 2001, the Company recorded
an inventory adjustment to increase cost of goods sold by approximately $1.5
million caused by book to physical variances resulting from year-end physical
inventory counts and by the disposal of certain impaired finished goods
inventory during the fourth quarter.

During the fourth quarter of fiscal year 2000, the Company recorded a
significant fourth quarter adjustment to increase the allowance for doubtful
accounts by approximately $1,772,000 for estimated uncollectible accounts
receivable from a major distributor that filed for liquidation under bankruptcy
laws in January 2001. In addition, the Company recorded a $1,042,266 charge to
record realized and unrealized losses on trading securities.

                                      53

<PAGE>

Item 9.  Changes in and Disagreements with Accountants or Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------

           Not Applicable

                                    PART III


Item 10. Directors and Executive Officers of the Registrant.
- -------------------------------------------------------------

           For information with respect to the Directors of the registrant, see
           "Election of Directors" in the Proxy Statement for the 2002 Annual
           Meeting of Shareholders of the Company, which information is
           incorporated herein by reference. For information with respect to the
           executive officers and significant employees of the registrant, see
           "Executive Officers and Other Significant Employees" in the Proxy
           Statement for the 2002 Annual Meeting of Shareholders of the Company,
           which information is incorporated herein by reference. The
           information with respect to compliance with Section 16(a) of the
           Securities Exchange Act of 1934, which is set forth under the caption
           "Compliance with Section 16(a) of the Securities Exchange Act of
           1934" in the Proxy Statement for the 2002 Annual Meeting of
           Shareholders of the Company, is incorporated herein by reference.

Item 11. Executive Compensation.
- --------------------------------

           The information set forth under the captions "Executive
           Compensation," "Compensation Committee Report on Executive
           Compensation", "Compensation Committee Interlocks and Insider
           Participation" and "Performance Graph" in the Proxy Statement for the
           2002 Annual Meeting of Shareholders of the Company is incorporated
           herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------

           The information pertaining to shareholders beneficially owning more
           than five percent of the Company's common stock and the security
           ownership of management, which is set forth under the caption
           "Beneficial Ownership of Common Stock" in the Proxy Statement for the
           2002 Annual Meeting of Shareholders of the Company, is incorporated
           herein by reference.

Item 13. Certain Relationships and Related Transactions.
- --------------------------------------------------------

           The information with respect to certain transactions with management
           of the Company, which is set forth under the caption "Certain
           Relationships and Transactions with Management" in the Proxy
           Statement for the 2002 Annual Meeting of Shareholders of the Company,
           is incorporated herein by reference.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- --------------------------------------------------------------------------

           (a)      List of documents filed as part of this report:

          1.        Financial statements: The Company's financial statements and
                    related information are included under Item 8 of this Form
                    10-K.

          2.        Financial statement schedules:

                    All schedules are omitted, as the required information is
                    inapplicable or the information is presented in the
                    financial statements or related notes thereto.

          3.        Exhibits to this Form 10-K pursuant to Item 601 of
                    Regulation S-K are as follows:



                                      54
<PAGE>

Exhibit No.                 Description
- -----------                 -----------

   3.1         Articles of Amendment filed November 5, 2001 to the Amended
               and Restated Articles of Incorporation, as amended through
               November 5, 2001 (incorporated by reference to Exhibit 1 to the
               Company's Form 8-A filed with the Commission on November 5,
               2001).

   3.2         Bylaws of Optical Cable Corporation, as amended (filed as
               exhibit 3.2 to the Registrant's Annual Report on Form 10-K
               for the fiscal year ended October 31, 1997 (file number
               0-27022), and incorporated herein by reference).

   4.1         Form of certificate representing Common Stock (filed as
               exhibit 4.1 to the Registrant's Annual Report on Form 10-K
               for the fiscal year ended October 31, 1997 (file number
               0-27022), and incorporated herein by reference).

   10.1        Royalty Agreement, dated November 1, 1993, by and between
               Robert Kopstein and Optical Cable Corporation (filed as
               exhibit 10.1 to the Registrant's Annual Report on Form 10-K
               for the fiscal year ended October 31, 1997 (file number
               0-27022), and incorporated herein by reference).

   10.2        Assignment of Technology Rights from Robert Kopstein to
               Optical Cable Corporation, effective as of October 31, 1994
               (filed as exhibit 10.2 to the Registrant's Annual Report on
               Form 10-K for the fiscal year ended October 31, 1997 (file
               number 0-27022), and incorporated herein by reference).

   10.3*       Employment Agreement by and between Optical Cable
               Corporation and Neil D. Wilkin, Jr. effective September 1, 2001.

   10.4*       Employment Agreement by and between Optical Cable Corporation and
               Ken Harber, effective November 21, 2001, and amendment thereto.

   10.5.*      Employment Agreement by and between Optical Cable Corporation and
               Luke Huybrechts, effective November 21, 2001, and amendment
               thereto.

   10.6        Tax Indemnification Agreement, dated as of October 19, 1995,
               by and between Optical Cable Corporation and Robert Kopstein
               (filed as exhibit 10.4 to the Registrant's Annual Report on
               Form 10-K for the fiscal year ended October 31, 1997 (file
               number 0-27022), and incorporated herein by reference).

   10.7        Loan Agreement dated March 10, 1999 by and between Optical
               Cable Corporation and First Union National Bank and modification
               thereto dated December 15, 1999, and amendments thereto dated
               October 3, 2001 and October 30, 2001.

   10.8        Security Agreement, dated April 25, 1997, by and between
               Optical Cable Corporation and First Union National Bank of
               Virginia and Security Agreement, dated March 13, 1996 by and
               between Optical Cable Corporation and First Union National Bank
               of Virginia.

   10.9        Promissory Note dated March 10, 1999 issued by Optical
               Cable Corporation to First Union National Bank in the amount
               of $5,000,000 and the Promissory Note dated March 10, 1999
               issued by Optical Cable Corporation to First Union National
               Bank in the amount of $10,000,000 (filed as Exhibit 10.8 to
               the Registrant's Quarterly Report on form 10-Q for the
               fiscal quarter ended January 31, 1999 (file number 0-27022),
               and incorporated herein by reference).




                                      55
<PAGE>

    10.11*          Optical Cable Corporation Employee Stock Purchase Plan
                    (filed as exhibit 10.9 to the Registrant's Quarterly Report
                    on Form 10-Q for the fiscal quarter ended July 31, 1998
                    (file number 0-27022), and incorporated herein by
                    reference).

    10.12*          Optical Cable Corporation 1996 Stock Incentive Plan
                    (incorporated by reference to Exhibit 28.1 to the
                    Registrant's Registration Statement on Form S-8 No.
                    333-09733).

    23              Consent of KPMG LLP to incorporation by reference of
                    independent auditors' report included in this Form 10-K into
                    registrant's registration statement on Form S-8.

* Management contract or compensatory plan or agreement.

       (b)          Reports on Form 8-K

       There was one report on Form 8-K filed by the Company during the fourth
       quarter of fiscal year 2001.


                  Form 8-K dated October 2, 2001, reporting under Item 1.

                                      56
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                            OPTICAL CABLE CORPORATION

Date: January 29, 2002                    By    /s/ Neil D. Wilkin, Jr.
                                                -----------------------
                                                Neil D. Wilkin, Jr.
                                                Acting President, Senior Vice
                                                President, Chief Financial
                                                Officer and Director

              Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of January 29, 2002.



Date:  January 29, 2002                      /s/ Neil D. Wilkin, Jr.
                                             -----------------------
                                             Neil D. Wilkin, Jr.
                                             Acting President, Senior Vice
                                             President, Chief Financial Officer
                                             (principal executive officer,
                                             principal financial and accounting
                                             officer) and Director

Date:  January 29, 2002                      /s/ Luke J. Huybrechts
                                             ----------------------
                                             Luke J. Huybrechts
                                             Senior Vice President of Sales
                                             and Director

Date:  January 29, 2002                      /s/ Kenneth W. Harber
                                             ----------------------
                                             Kenneth W. Harber
                                             Vice President of Finance,
                                             Treasurer, Secretary and Director

Date:  January 29, 2002
                                             ----------------------
                                             Randall H. Frazier
                                             Director

Date:  January 29, 2002                      /s/ John M. Holland
                                             -------------------
                                             John M. Holland
                                             Director

Date:  January 29, 2002                      /s/ Robert Kopstein
                                             -------------------
                                             Robert Kopstein
                                             Director


                                      57
<PAGE>

                           INDEX TO ATTACHED EXHIBITS

Exhibit No.          Description
- -----------          -----------

 10.3               Employment Agreement by and between Optical Cable
                    Corporation and Neil D. Wilkin, Jr. effective
                    September 1, 2001.

 10.4               Employment Agreement by and between Optical Cable
                    Corporation and Ken Harber, effective November 21, 2001,
                    and amendment thereto.

 10.5               Employment Agreement by and between Optical Cable
                    Corporation and Luke Huybrechts, effective
                    November 21, 2001, and amendment thereto.

 10.7               Loan Agreement dated March 10, 1999 by and between Optical
                    Cable Corporation and First Union National Bank and
                    modification thereto dated December 15, 1999, and
                    amendments thereto dated October 3, 2001 and October 30,
                    2001.

 10.8               Security Agreement, dated April 25, 1997, by and between
                    Optical Cable Corporation and First Union National Bank of
                    Virginia and Security Agreement, dated March 13, 1996 by and
                    between Optical Cable Corporation and First Union National
                    Bank of Virginia.

 23                 Consent of KPMG LLP to incorporation by reference of
                    independent auditors' report included in this Form 10-K
                    into registrant's registration statement on Form S-8.


                                      58

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>3
<FILENAME>dex103.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>

                                                                    Exhibit 10.3

                   [LETTERHEAD OF OPTICAL CABLE CORPORATION]

                           OPTICAL CABLE CORPORATION
                             EMPLOYMENT AGREEMENT

This agreement made effective September 1, 2001 by and between Optical Cable
Corporation, having a place of business at 5290 Concourse Drive, Roanoke,
Virginia (hereinafter referred to as "OCC"), and Neil D. Wilkin, Jr.,
(hereinafter referred to as "Wilkin").

WHEREAS, OCC desires to employ Wilkin and Wilkin desires to accept such
employment upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, OCC employs Wilkin and Wilkin accepts employment upon the following
terms and conditions:

1.   EMPLOYMENT AND DUTIES: Wilkin is employed as Senior VP and Chief Financial
     Officer of OCC. Wilkin hereby agrees to abide by the terms and conditions
     of this Agreement. Wilkin shall report directly to the President and CEO.
     The authority, duties and responsibilities of Wilkin shall include those
     duties as may be assigned to Wilkin by the President and CEO from time to
     time. While employed hereunder, Wilkin shall devote reasonable time and
     attention during normal business hours to the affairs of OCC and use his
     best efforts to perform faithfully and efficiently his duties and
     responsibilities.

2.   TERM AND RENEWAL: The term of this Agreement shall begin on September 1,
     2001 and shall terminate on August 31, 2003. At end of the initial term
     (and each renewal term, if any), this Agreement will automatically renew
     for an additional 2-year term unless one of the parties provides the other
     party with written notice indicating the intention not to renew this
     Agreement at least 6 months prior to the end of such term.

3.   COMPENSATION: For all services rendered by Wilkin, OCC shall pay Wilkin
     $120,000 annualsalary, payable in equal monthly installments on the first
     business day of each month during which Wilkin is employed, commencing on
     October 1, 2001.

     Plus, a monthly bonus equal to .0009 of the monthly sales which are
     adjusted for point of sale and payable on the 15/th/ of the following
     month.

     Plus, a lump sum year end bonus equal to the sum of the twelve fiscal year
     monthly bonuses, payable on or around January 15/th/ of the following year.

4.   STOCK OPTIONS: The terms and conditions of stock options granted to Wilkin
     are governed by the documents evidencing such options and are not intended
     to be addressed in this Agreement.

5.   TERMINATION: This Agreement shall terminate automatically upon the earliest
     of any of the following events and no act, failure to act (except as
     otherwise provided in this Agreement), oral statement or representation of
     OCC or any of its directors, officers, agents or employees, whether
     contained in any employee handbook or otherwise, will be deemed a waiver by
     OCC of its rights hereunder unless expressly stated to the contrary:

     a.   expiration of the term (including renewals, if any);
<PAGE>

     b.   OCC's termination of Wilkin without Cause (as defined below), provided
          that OCC has given Wilkin 30-days prior written notice;

     c.   resignation by Wilkin other than for Good Reason (as defined below),
          provided that Wilkin has given OCC 30-days prior written notice;

     d.   death of Wilkin (effective on the last day of the month in which death
          occurs);

     e.   the inability of Wilkin to perform substantially all of his duties
          hereunder by reason of illness, physical, mental or emotional
          disability or other incapacity, which inability shall continue for
          more than four successive months or six months in the aggregate during
          any period of 12 consecutive months; provided that OCC has given
          Wilkin written notice at or before the end of such period Wilkin does
          not return to work on a full-time basis; or

     f.   OCC's termination of Wilkin for Cause, provided that OCC has given
          Wilkin written notice. For purposes of this Agreement, "Cause" shall
          mean:

           i.   Wilkin's material breach of this Agreement, which breach is not
                cured within 30 days of receipt by Wilkin of notice from OCC
                specifying the breach; orii. Wilkin's gross negligence in the
                performance of his material duties hereunder, intentional
                nonperformance or misperformance of such duties, or refusal to
                abide by or comply with the directives of the Board, his
                superior officers, or the OCC's policies and procedures
                (including nondiscrimination and sexual harassment), which
                actions continue for a period of at least 30 days after receipt
                by Wilkin of written notice of the need to cure or cease; or

           ii.  Wilkin's willful dishonesty, fraud, or misconduct with respect
                to the business or affairs of OCC, that in the reasonable
                judgment of the Board of Directors materially and adversely
                affects the operations or reputation of OCC; or

           iii. Wilkin's conviction of a felony or other crime involving moral
                turpitude (whether or not in connection with his employment); or

           iv.  failure of Wilkin to pass any drug or alcohol test administered
                in accordance with OCC's substance abuse policies.

     g.   resignation by Wilkin for Good Reason with 3D-days prior written
          notice. For purposes of this Agreement, "Good Reason" shall mean:

           i.   a change in reporting relationships such that Wilkin no longer
                directly reports to the President and CEO of OCC; or

           ii.  a material diminution in the nature or scope of Wilkin's powers,
                duties or responsibilities to a level below that which would
                ordinarily be assigned to an executive officer serving as Senior
                Vice President and Chief Financial Officer, without Wilkin's
                prior written consent; or

           iii. failure by OCC to provide Wilkin with the compensation and
                benefits in accordance with the terms of this Agreement; or

           iv.  relocation of OCC's principal executive offices to a location
                outside a thirty (30) mile radius of Roanoke, VA; or
<PAGE>

          v.    willful dishonesty, fraud, or misconduct with respect to the
                business or affairs of OCC by the Board of Directors or Wilkin's
                superior officers, that in the reasonable judgment of Wilkin
                materially and adversely affect the operations or reputation of
                OCC.

6.   EFFECT OF TERMINATION: Except as expressly set forth below, OCC shall have
     no further obligations to Wilkin under this Agreement after the termination
     of his employment hereunder:

     a.   Termination For Cause. If Wilkin is terminated for Cause by OCC, as
          defined in Section 5(f) above, OCC shall pay to Wilkin his salary and
          pro rata bonuses earned through the date of termination.

     b.   Resignation by Wilkin without Good Reason. If this Agreement is
          terminated by the resignation of Wilkin without Good Reason, OCC shall
          pay to Wilkin his salary and pro rata bonuses earned through the date
          of termination.

     c.   Termination without Cause, upon Death or Disability, or Resignation
          for Good Reason. If this Agreement is terminated for any of the
          reasons stated in Sections 5(b), (d),(e) or (g), OCC shall pay to
          Wilkin his salary and pro rata bonuses earned through the date
          of termination, as well as a severance payment equal to six (6) months
          salary (including bonuses), less applicable withholdings, payable in
          the same manner as during Wildin's employment.

7.   RELOCATION: Upon accepting employment with OCC, Wilkin will be paid a one-
     time relocation bonus of $15,000.00.

8.   PATENT RIGHTS: Wilkin's interest in any and all inventions or improvements
     made or conceived by him, or which he may make or conceive at any time
     after the commencement of and until the termination of his employment with
     OCC, either individually or jointly with others, which relate to the
     business conducted by or planned to be conducted by OCC as reasonably
     determined by OCC, shall be the exclusive property of OCC, its successors,
     assignees or nominees. He will make full and prompt disclosure in writing
     to an officer or official of OCC, or to anyone designated for that purpose
     by OCC, of all inventions or improvements made or conceived by him during
     the term of his employment. At the request and expense of OCC, and without
     further compensation to him, Wilkin will for all inventions or improvements
     which may be patentable, do all lawful acts and execute and acknowledge any
     and all letters and/or patents in the United States of America and foreign
     countries for any of such inventions and improvements, and for vesting in
     OCC the entire right, title and interest thereto. As used in this
     Agreement, "inventions or improvements" means discoveries, concepts, and
     ideas, whether patentable or not, relating to any present or prospective
     activities of OCC, including, but not limited to, devices, processes,
     methods, formulae, techniques, and any improvements to the foregoing.

9.   CONFIDENTIALLY; DISCLOSURE OF INFORMATION: Since the work for which Wilkin
     is employed and upon which he shall be engaged, will include trade secrets
     and confidential information of OCC or its customers, Wilkin receive such
     trade secrets and confidential information in confidence and shall not,
     except as required in the conduct of OCC's business, publish or disclose,
     or make use of or authorize anyone else to publish, disclose, or make use
     of any such secrets or information unless and until such secrets or
     information shall have ceased to be secret or confidential as evidenced by
     public knowledge. This prohibition as to publication and disclosures shall
     not restrict him in the exercise of his technical skill, provided that the
     exercise of such skill does not involve the disclosure to others not
     authorized to receive trade secret or confidential information of OCC or
     its customers. As used in this Agreement, "trade secrets and confidential
     information" includes any formula, pattern device or compilation of
     information used in the business of OCC or its customers for which OCC
     derives independent economic value by
<PAGE>

     affording OCC opportunity to obtain advantage over competitors who do not
     know or use such information; the term includes, but is not limited to,
     devices and processes, whether patentable or not, compilations of
     information such as customer lists, business and marketing plans, and
     pricing information where certain of the information involved is generally
     known or available but where the compilation, organization or use of the
     information is not generally known and is of significance to the business
     of OCC or its customers. The provisions of this paragraph (nine) 9 shall
     apply throughout the period of Wilkin's employment with OCC, and
     thereafter.

10.  NON-COMPETE: Wilkin covenants and agrees that during the term of his
     employment with OCC (as employee, consultant or otherwise) and for the
     twelve (12) consecutive months immediately following termination of that
     employment by either party for any reason he will not directly or
     indirectly own or have an ownership interest in, render services similar to
     those he is providing hereunder to, or work in the same or similar capacity
     in which he is employed hereunder for any business which competes with OCC
     or is engaged in the same or similar business conducted by OCC during the
     period of Wilkin's employment with OCC; nor will he call on, solicit or
     deal with any customers or prospective customer of OCC learned about or
     developed during Wilkin's employment with OCC for twelve (12) consecutive
     months immediately following termination of that employment by either party
     for any reason. This Agreement shall apply to Wilkin as an individual for
     his own account, as a partner or joint venturer, as an employee, agent
     salesman or consultant for any person or entity, as an officer, director or
     shareholder.

11.  RETURN OF OCC PROPERTY: Immediately upon the termination of his employment
     with OCC, Wilkin will turn over to OCC all keys, passwords, computers,
     notes, memoranda, notebooks,drawings, records, documents, and all computer
     program source listings, object files, and executable images or other
     information or materials obtained from OCC or developed or modified by him
     as part of his work for OCC which are in his possession or under his
     control, whether prepared by him or others, relating to any work done for
     OCC or relating in any way to the business of OCC or its customers, it
     being acknowledged that all such items are the sole property of OCC.

12.  BENEFITS: Wilkin shall be entitled to such vacation and benefits of OCC as
     OCC may from time to time establish for employees of similar positions,
     responsibilities and seniority; provided that Wilkin will receive at least
     3 weeks vacation per year.

13.  BINDING ON OTHER PARTIES: This Agreement shall be binding upon and inure to
     the benefit of Wilkin, his heirs, executors and administrators, and shall
     be binding upon and inure to the benefit of OCC and its successors and
     assigns.

14.  ENFORCEMENT AND REMEDIES: This Agreement shall be enforced and construed in
     accordance with the laws of the Commonwealth of Virginia.

     Each party acknowledges that in the event of a breach or threatened breach
     of the confidentiality or non-compete provisions set out in paragraphs 9
     and 10 of the Agreement, damages at law will be inadequate and injunctive
     relief is appropriate in addition to whatever damages may be recoverable.
     Wilkin agrees to pay the costs, including attorneys fees incurred by OCC in
     enforcing the provisions of paragraphs 9 and 10.

     Each and all of the several rights and remedies contained in or arising by
     reason of this Agreement shall be construed as cumulative and no one of
     them shall be exclusive of any other or of any right or priority allowed by
     law or equity.

15.  NOTICES: Any notice required or desired to be given under this Agreement
     shall be deemed given if in writing sent by U.S. Mail to his last known
     residence in the case of Wilkin or to its principal office in the case of
     OCC.
<PAGE>

16.  SEVERABILITY: It is understood and agreed that, should any portion of any
     clause or paragraph of this Agreement be deemed too broad to permit
     enforcement to its full extent, then such restriction shall be enforced to
     the maximum extent permitted by law, and the parties hereby consent and
     agree that such scope may be modified accordingly in a proceeding brought
     to enforce such restriction. Further, it is agreed that, should any
     provision in the Agreement be entirely unenforceable, the remaining
     provisions of this Agreement shall not be affected.

17.  ASSIGNMENT: Wilkin may not transfer, pledge, encumber, assign, anticipate,
     or alienate all or any part of this Agreement.

18.  PRIOR AGREEMENT; MODIFICATION: No modifications or waiver of this
     Agreement, or of any provision thereof, shall be valid or binding, unless
     in writing and executed by both parties hereto. No waiver by either party
     of any breach of any term or provision of this Agreement shall be construed
     as a waiver of any succeeding breach of the same or any other term or
     provision.

WHEREOF, the parties have executed this Agreement as of the day and year first
written above.


/s/ Neil D. Wilkin, Jr
- ------------------------
Neil D. Wilkin, Jr.



Optical Cable Corporation

By:  /s/ Robert Kopstein
     ---------------------------
     Robert Kopstein
     President and Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>4
<FILENAME>dex104.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<PAGE>

                                                                    Exhibit 10.4


                           OPTICAL CABLE CORPORATION
                             EMPLOYMENT AGREEMENT

This agreement made effective November 21, 2001 by and between Optical Cable
Corporation, having a place of business at 5290 Concourse Drive, Roanoke,
Virginia (hereinafter referred to as "OCC"), and Ken Harber (hereinafter
referred to as "Harber").

WHEREAS, OCC desires to employ Harber and Harber desires to accept such
employment upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, OCC employs Harber and Harber accepts employment upon the following
terms and conditions:

1.   EMPLOYMENT AND DUTIES: Harber is employed as Vice President of Finance of
     OCC. Harber hereby agrees to abide by the terms and conditions of this
     Agreement. Harber shall report directly to the Senior Vice President and
     Chief Financial Officer of OCC. The authority, duties and responsibilities
     of Harber shall include those duties as may be assigned to Harber by the
     President from time to time. While employed hereunder, Harber shall devote
     reasonable time and attention during normal business hours to the affairs
     of OCC and use his best efforts to perform faithfully and efficiently his
     duties and responsibilities.

2.   TERM AND RENEWAL: The term of this Agreement shall begin on November 21,
     2001 and shall terminate on the 30th day of November, 2003. At the end of
     the initial term (and each renewal term, if any), this Agreement will
     automatically renew for an additional 2-year term unless one of the parties
     provides the other party with written notice indicating the intention not
     to renew this Agreement at least 6 months prior to the end of such term.

3.   COMPENSATION:

     a.  Salary. For all services rendered by Harber, OCC shall pay Harber
         $107,500 annual salary, payable in equal monthly installments on the
         first business day of each month during which Harber is employed,
         commencing on December 1, 2001.

     b.  Sales bonus. Harber will be paid a monthly bonus equal to .0009 of the
         monthly sales which are adjusted for point of sale and payable on the
         15th of the following month.

     c.  Annual bonus. Harber will be paid a lump sum bonus equal to the sum of
         the twelve fiscal year monthly bonuses, payable on or around January
         15th of the following year.

4.   STOCK OPTIONS:  The terms and conditions of stock options granted to Harber
     are governed by the documents evidencing such options and are not intended
     to be addressed in this Agreement.

                                      -1-
<PAGE>

5.   TERMINATION: This Agreement shall terminate automatically upon the earliest
     -----------
     of any of the following events and no act, failure to act (except as
     otherwise provided in this Agreement), oral statement or representation of
     OCC or any of its directors, officers, agents or employees, whether
     contained in any employee handbook or otherwise, will be deemed a waiver by
     OCC of its rights hereunder unless expressly stated to the contrary:

     a.  expiration of the term (including renewals, if any);

     b.  OCC's termination of Harber without Cause (as defined below), provided
         that OCC has given Harber thirty (30) days prior written notice; c.

     c.  resignation by Harber other than for Good Reason (as defined below),
         provided that Harber has given OCC thirty (30) days prior written
         notice;

     d.  death of Harber (effective on the last day of the month in which death
         occurs);

     e.  the inability of Harber to perform substantially all of his duties
         hereunder by reason of illness, physical, mental or emotional
         disability or other incapacity, which inability shall continue for more
         than four successive months or six months in the aggregate during any
         period of 12 consecutive months, provided that OCC has given Harber
         written notice at or before the end of such period Harber does not
         return to work on a full-time basis; or

     f.  OCC's termination of Harber for Cause, provided that OCC has given
         Harber written notice. For purposes of this Agreement, "Cause" shall
         mean:

         i.    Harber's material breach of this Agreement, which breach is not
               cured within thirty (30) days of receipt by Harber of notice from
               OCC specifying the breach; or

         ii.   Harber's gross negligence in the performance of his material
               duties hereunder, intentional non-performance or misperformance
               of such duties, or refusal to abide by or comply with the
               directives of the Board, his superiors, or OCC's policies and
               procedures (including non-discrimination and sexual harassment),
               which actions continue for a period of at least thirty (30) days
               after receipt by Harber of written notice of the need to cure or
               cease; or

         iii.  Harber's willful dishonesty, fraud, or misconduct with respect to
               the business or affairs of OCC, that in the reasonable judgment
               of the Board of Directors materially and adversely affects the
               operations or reputation of OCC; or

         iv.   Harber's conviction of a felony or other crime involving moral
               turpitude (whether or not in connection with his employment);


                                      -2-
<PAGE>

          v.   failure of Harber to pass any drug or alcohol test administered
               in accordance with OCC's substance abuse policies.

     g.   resignation by Harber for Good Reason with thirty (30) days prior
          written notice. For purposes of this Agreement, "Good Reason" shall
          mean:

          i.   a change in reporting relationships such that Harber no longer
               directly reports to the Senior Vice President and Chief Financial
               Officer or the President of OCC, without Harber's prior written
               consent; or

          ii.  a material diminution in the nature or scope of Harber's powers,
               duties or responsibilities to a level below that which would
               ordinarily be assigned to an employee serving as Vice President
               of Finance, without Harber's prior written consent; or

          iii. failure by OCC to provide Harber with the compensation and
               benefits in accordance with the terms of this Agreement; or

          iv.  relocation of OCC's principal executive offices to a location
               outside a thirty (30) mile radius of Roanoke, Virginia.

6.   EFFECT OF TERMINATION:  Except as expressly set forth below, OCC shall have
     ---------------------
     no further obligations to Harber under this Agreement after the termination
     of his employment hereunder:

     a.   Termination For Cause. If Harber is terminated for Cause by OCC, as
          ---------------------
          defined in Section 5(f) above, OCC shall pay to Harber his salary and
          pro rata bonuses earned through the date of termination.

     b.   Resignation by Harber Without Good Reason. If this Agreement is
          -----------------------------------------
          terminated by the resignation of Harber without Good Reason, OCC shall
          pay to Harber his salary and pro rata bonuses earned through the date
          of termination.

     c.   Termination without Cause, upon Death or Disability, or Resignation
          -------------------------------------------------------------------
          for Good Reason. If this Agreement is terminated for any of the
          ---------------
          reasons stated in Sections 5(b), (d), (e), or (g), OCC shall pay to
          Harber his salary and pro rata bonuses earned through the date of
          termination, as well as a severance payment equal to six (6) months
          salary (including bonuses), less applicable withholdings, payable in
          the same manner as during Harber's employment.

7.   PATENT RIGHTS: Harber's interest in any and all inventions or improvements
     made or conceived by him, or which he may make or conceive at any time
     after the commencement of and until the termination of his employment with
     OCC, either individually or jointly with

                                      -3-
<PAGE>

     others, which relate to the business conducted by or planned to be
     conducted by OCC as reasonably determined by OCC, shall be the exclusive
     property of OCC, its successors, assignees or nominees. He will make full
     and prompt disclosure in writing to an officer or official of OCC, or to
     anyone designated for that purpose by OCC, of all inventions or
     improvements made or conceived by him during the term of his employment. At
     the request and expense of OCC, and without further compensation to him,
     Harber will for all inventions or improvements which may be patentable, do
     all lawful acts and execute and acknowledge any and all letters and/or
     patents in the United States of America and foreign countries for any of
     such inventions and improvements and for vesting in OCC the entire right,
     title and interest thereto. As used in this Agreement, "inventions or
     improvements" means discoveries, concepts, and ideas, whether patentable or
     not, relating to any present or prospective activities of OCC, including,
     but not limited to, devices, processes, methods, formulae, techniques, and
     any improvements to the foregoing.

8.   CONFIDENTIALITY; DISCLOSURE OF INFORMATION: Since the work for which Harber
     is employed and upon which he shall be engaged, will include trade secrets
     and confidential information of OCC or its customers, Harber receives such
     trade secrets and confidential information in confidence and shall not,
     except as required in the conduct of OCC's business, publish or disclose,
     or make use of or authorize anyone else to publish, disclose, or make use
     of, any such secrets or information unless and until such secrets or
     information shall have ceased to be secret or confidential as evidenced by
     public knowledge. This prohibition as to publication and disclosures shall
     not restrict him in the exercise of his technical skill, provided that the
     exercise of such skill does not involve the disclosure to others not
     authorized to receive trade secret or confidential information of OCC or
     its customers. As used in this Agreement, "trade secrets" and "confidential
     information" includes any formula, pattern, device or compilation of
     information used in the business of OCC or its customers for which OCC
     derives independent economic value by affording OCC an opportunity to
     obtain advantage over competitors who do not know or use such information;
     the term includes, but is not limited to, devices and processes, whether
     patentable or not, compilations of information such as customer lists,
     business and marketing plans, and pricing information where certain of the
     information involved is generally known or available but where the
     compilation, organization or use of the information is not generally known
     and is of significance to the business of OCC or its customers. The
     provisions of this paragraph eight (8) shall apply throughout the period of
     Harber's employment with OCC, and thereafter.

9.   NON-COMPETE: Harber covenants and agrees that during the term of his
     employment with OCC (as employee, consultant or otherwise) and for the
     twelve (12) consecutive months immediately following termination of that
     employment by either party for any reason, and within the geographic area
     within which OCC is conducting business at the time of termination of his
     employment, he will not directly or indirectly participate in the
     management of, render services similar to those he is providing hereunder
     to, or work in the

                                      -4-
<PAGE>

     same or similar capacity in which he is employed hereunder for, any
     business which competes with OCC or is engaged in the same or similar
     business conducted by OCC during the period of Harber's employment with
     OCC; nor will he call on, solicit or deal with any customers or prospective
     customer of OCC learned about or developed during Harber's employment with
     OCC for the twelve (12) consecutive months immediately following
     termination of that employment by either party for any reason.

10.  RETURN OF OCC PROPERTY: Immediately upon the termination of his employment
     with OCC, Harber will turn over to OCC all keys, passwords, computers,
     notes, memoranda, notebooks, drawings, records, documents, and all computer
     program source listings, object files, and executable images or other
     information or materials obtained from OCC or developed or modified by him
     as part of his work for OCC which are in his possession or under his
     control, whether prepared by him or others, relating to any work done for
     OCC or relating in any way to the business of OCC or its customers, it
     being acknowledged that all such items are the sole property of OCC.

11.  BENEFITS: Harber shall be entitled to such vacation and benefits of OCC as
     OCC may from time to time establish for employees of similar positions,
     responsibilities and seniority, provided that Harber will receive at least
     three (3) weeks of vacation per year.

12.  BINDING ON OTHER PARTIES: This Agreement shall be binding upon and inure to
     the benefit of Harber, his heirs, executors and administrators, and shall
     be binding upon and inure to the benefit of OCC and its successors and
     assigns.

13.  ENFORCEMENT AND REMEDIES: This Agreement shall be enforced and construed in
     accordance with the laws of the Commonwealth of Virginia.

     Each party acknowledges that in the event of a breach or threatened breach
     of the confidentiality or non-compete provisions set out in paragraphs 8
     and 9 of the Agreement, damages at law will be inadequate and injunctive
     relief is appropriate in addition to whatever damages may be recoverable.
     Harber agrees to pay the costs, including attorneys fees, incurred by OCC
     in enforcing the provisions of paragraphs 8 and 9.

     Each and all of the several rights and remedies contained in or arising by
     reason of this Agreement shall be construed as cumulative and no one of
     them shall be exclusive of any other or of any right or priority allowed by
     law or equity.

14.  NOTICES: Any notice required or desired to be given under this Agreement
     shall be deemed given if in writing sent by U.S. Mail to his last known
     residence in the case of Harber or to its principal office in the case of
     OCC.

15.  SEVERABILITY: It is understood and agreed that, should any portion of any
     clause or paragraph of this Agreement be deemed too broad to permit
     enforcement to its full extent,

                                      -5-
<PAGE>

     then such restriction shall be enforced to the maximum extent permitted by
     law, and the parties hereby consent and agree that such scope may be
     modified accordingly in a proceeding brought to enforce such restriction.
     Further, it is agreed that, should any provision in the Agreement be
     entirely unenforceable, the remaining provisions of this Agreement shall
     not be affected.

16.  ASSIGNMENT: Harber may not transfer, pledge, encumber, assign, anticipate,
     or alienate all or any part of this Agreement.

17.  PRIOR AGREEMENT; MODIFICATION: No modifications or waiver of this
     Agreement, or of any provision thereof, shall be valid or binding, unless
     in writing and executed by both parties hereto. No waiver by either party
     of any breach of any term or provision of this Agreement shall be construed
     as a waiver of any succeeding breach of the same or any other term or
     provision.

WHEREOF, the parties have executed this Agreement as of the day and year first
written above.

/s/ Ken Harber
- ----------------------------
Ken Harber


Optical Cable Corporation

By:  /s/ Randy Frazier
   -------------------------
Randy Frazier
Independent Board Member and
Member of the Compensation Committee

By:  /s/ John Holland
   -------------------------
John Holland
Independent Board Member and
Member of the Compensation Committee

                                      -6-
<PAGE>

                                 AMENDMENT TO
                      OPTICAL CABLE EMPLOYMENT AGREEMENT

     The foregoing Agreement hereby is amended as follows:

     The opening paragraph is amended to reflect the correct effective date of
November 1, 2001.

     Numbered Paragraph 2 on Page 1 is amended to reflect "The term of this
Agreement shall begin on November 1, 2001, and shall terminate on the 31/st/ day
of October 2003."

     Numbered Paragraph 3.a. is amended to reflect the commencement date of
employment under the Agreement as November 1, 2001.


                                 OPTICAL CABLE CORPORATION



Date:                            By: /s/ Randy Frazier
      -------------                  ---------------------------------
                                     Randy Frazier
                                     Independent Board Member and
                                     Member of the Compensation Committee



Date:                            By: /s/ John Holland
      -------------                  ---------------------------------
                                     John Holland
                                     Independent Board Member and
                                     Member of the Compensation Committee



Date:                            By: /s/ Kenneth W. Harber
      -------------                  ---------------------------------
                                     Kenneth W. Harber

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>5
<FILENAME>dex105.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
<PAGE>

                                                                    Exhibit 10.5


                           OPTICAL CABLE CORPORATION
                             EMPLOYMENT AGREEMENT

This agreement made effective November 21, 2001 by and between Optical Cable
Corporation, having a place of business at 5290 Concourse Drive, Roanoke,
Virginia (hereinafter referred to as "OCC"), and Luke Huybrechts (hereinafter
referred to as "Huybrechts").

WHEREAS, OCC desires to employ Huybrechts and Huybrechts desires to accept such
employment upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, OCC employs Huybrechts and Huybrechts accepts employment upon the
following terms and conditions:

1.   EMPLOYMENT AND DUTIES: Huybrechts is employed as Senior Vice President of
     Sales of OCC. Huybrechts hereby agrees to abide by the terms and conditions
     of this Agreement. Huybrechts shall report directly to the President of
     OCC. The authority, duties and responsibilities of Huybrechts shall include
     those duties as may be assigned to Huybrechts by the President from time to
     time. While employed hereunder, Huybrechts shall devote reasonable time and
     attention during normal business hours to the affairs of OCC and use his
     best efforts to perform faithfully and efficiently his duties and
     responsibilities.

2.   TERM AND RENEWAL: The term of this Agreement shall begin on November 21,
     2001 and shall terminate on the 30th day of November, 2003. At the end of
     the initial term (and each renewal term, if any), this Agreement will
     automatically renew for an additional 2-year term unless one of the parties
     provides the other party with written notice indicating the intention not
     to renew this Agreement at least 6 months prior to the end of such term.

3.   COMPENSATION:

     a.   Salary. For all services rendered by Huybrechts, OCC shall pay
          Huybrechts $113,820 annual salary, payable in equal monthly
          installments on the first business day of each month during which
          Huybrechts is employed, commencing on December 1, 2001.

     b.   Sales bonus. Huybrechts will be paid a monthly bonus equal to .0009 of
          the monthly sales which are adjusted for point of sale and payable on
          the 15/th/ of the following month.

     c.   Annual bonus. Huybrechts will be paid a lump sum bonus equal to the
          sum of the twelve fiscal year monthly bonuses, payable on or around
          January 15/th/ of the following year.


                                      -1-
<PAGE>

4.   STOCK OPTIONS: The terms and conditions of stock options granted to
     Huybrechts are governed by the documents evidencing such options and are
     not intended to be addressed in this Agreement.

5.   TERMINATION: This Agreement shall terminate automatically upon the earliest
     -----------
     of any of the following events and no act, failure to act (except as
     otherwise provided in this Agreement), oral statement or representation of
     OCC or any of its directors, officers, agents or employees, whether
     contained in any employee handbook or otherwise, will be deemed a waiver by
     OCC of its rights hereunder unless expressly stated to the contrary:

     a.   expiration of the term (including renewals, if any);

     b.   OCC's termination of Huybrechts without Cause (as defined below),
          provided that OCC has given Huybrechts thirty (30) days prior written
          notice;

     c.   resignation by Huybrechts other than for Good Reason (as defined
          below), provided that Huybrechts has given OCC thirty (30) days prior
          written notice;

     d.   death of Huybrechts (effective on the last day of the month in which
          death occurs);

     e.   the inability of Huybrechts to perform substantially all of his duties
          hereunder by reason of illness, physical, mental or emotional
          disability or other incapacity, which inability shall continue for
          more than four successive months or six months in the aggregate during
          any period of 12 consecutive months, provided that OCC has given
          Huybrechts written notice at or before the end of such period
          Huybrechts does not return to work on a full-time basis; or

     f.   OCC's termination of Huybrechts for Cause, provided that OCC has given
          Huybrechts written notice. For purposes of this Agreement, "Cause"
          shall mean:

          i.   Huybrechts's material breach of this Agreement, which breach is
               not cured within thirty (30) days of receipt by Huybrechts of
               notice from OCC specifying the breach; or

          ii.  Huybrechts's gross negligence in the performance of his material
               duties hereunder, intentional non-performance or misperformance
               of such duties, or refusal to abide by or comply with the
               directives of the Board, his superiors, or OCC's policies and
               procedures (including non-discrimination and sexual harassment),
               which actions continue for a period of at least thirty (30) days
               after receipt by Huybrechts of written notice of the need to cure
               or cease; or

                                      -2-
<PAGE>

          iii. Huybrechts's willful dishonesty, fraud, or misconduct with
               respect to the business or affairs of OCC, that in the reasonable
               judgment of the Board of Directors materially and adversely
               affects the operations or reputation of OCC; or

          iv.  Huybrechts's conviction of a felony or other crime involving
               moral turpitude (whether or not in connection with his
               employment);

          v.   failure of Huybrechts to pass any drug or alcohol test
               administered in accordance with OCC's substance abuse policies.

     g.   resignation by Huybrechts for Good Reason with thirty (30) days prior
          written notice. For purposes of this Agreement, "Good Reason" shall
          mean:

          i.   a change in reporting relationships such that Huybrechts no
               longer directly reports to the President of OCC, without
               Huybrechts's prior written consent; or

          ii.  a material diminution in the nature or scope of Huybrechts's
               powers, duties or responsibilities to a level below that which
               would ordinarily be assigned to an employee serving as Senior
               Vice President of Sales, without Huybrechts's prior written
               consent; or

          iii. failure by OCC to provide Huybrechts with the compensation and
               benefits in accordance with the terms of this Agreement; or

          iv.  relocation of OCC's principal executive offices to a location
               outside a thirty (30) mile radius of Roanoke, Virginia.

6.   EFFECT OF TERMINATION: Except as expressly set forth below, OCC shall have
     ----------------------
     no further obligations to Huybrechts under this Agreement after the
     termination of his employment hereunder:

     a.   Termination For Cause. If Huybrechts is terminated for Cause by OCC,
          ---------------------
          as defined in Section 5(f) above, OCC shall pay to Huybrechts his
          salary and pro rata bonuses earned through the date of termination.

     b.   Resignation by Huybrechts Without Good Reason. If this Agreement is
          ---------------------------------------------
          terminated by the resignation of Huybrechts without Good Reason, OCC
          shall pay to Huybrechts his salary and pro rata bonuses earned through
          the date of termination.

     c.   Termination without Cause, upon Death or Disability, or Resignation
          -------------------------------------------------------------------
          for Good Reason. If this Agreement is terminated for any of the
          ---------------
          reasons stated in Sections

                                      -3-
<PAGE>

          5(b), (d), (e), or (g), OCC shall pay to Huybrechts his salary and pro
          rata bonuses earned through the date of termination, as well as a
          severance payment equal to six (6) months salary (including bonuses),
          less applicable withholdings, payable in the same manner as during
          Huybrechts's employment.

7.   PATENT RIGHTS: Huybrechts's interest in any and all inventions or
     improvements made or conceived by him, or which he may make or conceive at
     any time after the commencement of and until the termination of his
     employment with OCC, either individually or jointly with others, which
     relate to the business conducted by or planned to be conducted by OCC as
     reasonably determined by OCC, shall be the exclusive property of OCC, its
     successors, assignees or nominees. He will make full and prompt disclosure
     in writing to an officer or official of OCC, or to anyone designated for
     that purpose by OCC, of all inventions or improvements made or conceived by
     him during the term of his employment. At the request and expense of OCC,
     and without further compensation to him, Huybrechts will for all inventions
     or improvements which may be patentable, do all lawful acts and execute and
     acknowledge any and all letters and/or patents in the United States of
     America and foreign countries for any of such inventions and improvements
     and for vesting in OCC the entire right, title and interest thereto. As
     used in this Agreement, "inventions or improvements" means discoveries,
     concepts, and ideas, whether patentable or not, relating to any present or
     prospective activities of OCC, including, but not limited to, devices,
     processes, methods, formulae, techniques, and any improvements to the
     foregoing.

8.   CONFIDENTIALITY; DISCLOSURE OF INFORMATION: Since the work for which
     Huybrechts is employed and upon which he shall be engaged, will include
     trade secrets and confidential information of OCC or its customers,
     Huybrechts receives such trade secrets and confidential information in
     confidence and shall not, except as required in the conduct of OCC's
     business, publish or disclose, or make use of or authorize anyone else to
     publish, disclose, or make use of, any such secrets or information unless
     and until such secrets or information shall have ceased to be secret or
     confidential as evidenced by public knowledge. This prohibition as to
     publication and disclosures shall not restrict him in the exercise of his
     technical skill, provided that the exercise of such skill does not involve
     the disclosure to others not authorized to receive trade secret or
     confidential information of OCC or its customers. As used in this
     Agreement, "trade secrets" and "confidential information" includes any
     formula, pattern, device or compilation of information used in the business
     of OCC or its customers for which OCC derives independent economic value by
     affording OCC an opportunity to obtain advantage over competitors who do
     not know or use such information; the term includes, but is not limited to,
     devices and processes, whether patentable or not, compilations of
     information such as customer lists, business and marketing plans, and
     pricing information where certain of the information involved is generally
     known or available but where the compilation, organization or use of the
     information is not generally known and is of significance to the business
     of OCC or its customers. The provisions of this paragraph eight (8) shall
     apply throughout the period of Huybrechts's employment with OCC, and
     thereafter.

                                      -4-
<PAGE>

9.   NON-COMPETE: Huybrechts covenants and agrees that during the term of his
     employment with OCC (as employee, consultant or otherwise) and for the
     twelve (12) consecutive months immediately following termination of that
     employment by either party for any reason, and within the geographic area
     within which OCC is conducting business at the time of termination of his
     employment, he will not directly or indirectly participate in the
     management of, render services similar to those he is providing hereunder
     to, or work in the same or similar capacity in which he is employed
     hereunder for, any business which competes with OCC or is engaged in the
     same or similar business conducted by OCC during the period of Huybrechts's
     employment with OCC; nor will he call on, solicit or deal with any
     customers or prospective customer of OCC learned about or developed during
     Huybrechts's employment with OCC for the twelve (12) consecutive months
     immediately following termination of that employment by either party for
     any reason.

10.  RETURN OF OCC PROPERTY: Immediately upon the termination of his employment
     with OCC, Huybrechts will turn over to OCC all keys, passwords, computers,
     notes, memoranda, notebooks, drawings, records, documents, and all computer
     program source listings, object files, and executable images or other
     information or materials obtained from OCC or developed or modified by him
     as part of his work for OCC which are in his possession or under his
     control, whether prepared by him or others, relating to any work done for
     OCC or relating in any way to the business of OCC or its customers, it
     being acknowledged that all such items are the sole property of OCC.

11.  BENEFITS: Huybrechts shall be entitled to such vacation and benefits of OCC
     as OCC may from time to time establish for employees of similar positions,
     responsibilities and seniority, provided that Huybrechts will receive at
     least three (3) weeks of vacation per year.

12.  BINDING ON OTHER PARTIES: This Agreement shall be binding upon and inure to
     the benefit of Huybrechts, his heirs, executors and administrators, and
     shall be binding upon and inure to the benefit of OCC and its successors
     and assigns.

13.  ENFORCEMENT AND REMEDIES: This Agreement shall be enforced and construed in
     accordance with the laws of the Commonwealth of Virginia.

     Each party acknowledges that in the event of a breach or threatened breach
     of the confidentiality or non-compete provisions set out in paragraphs 8
     and 9 of the Agreement, damages at law will be inadequate and injunctive
     relief is appropriate in addition to whatever damages may be recoverable.
     Huybrechts agrees to pay the costs, including attorneys fees, incurred by
     OCC in enforcing the provisions of paragraphs 8 and 9.

     Each and all of the several rights and remedies contained in or arising by
     reason of this Agreement shall be construed as cumulative and no one of
     them shall be exclusive of any other or of any right or priority allowed by
     law or equity.

                                      -5-
<PAGE>

14.  NOTICES: Any notice required or desired to be given under this Agreement
     shall be deemed given if in writing sent by U.S. Mail to his last known
     residence in the case of Huybrechts or to its principal office in the case
     of OCC.

15.  SEVERABILITY: It is understood and agreed that, should any portion of any
     clause or paragraph of this Agreement be deemed too broad to permit
     enforcement to its full extent, then such restriction shall be enforced to
     the maximum extent permitted by law, and the parties hereby consent and
     agree that such scope may be modified accordingly in a proceeding brought
     to enforce such restriction. Further, it is agreed that, should any
     provision in the Agreement be entirely unenforceable, the remaining
     provisions of this Agreement shall not be affected.

16.  ASSIGNMENT: Huybrechts may not transfer, pledge, encumber, assign,
     anticipate, or alienate all or any part of this Agreement.

17.  PRIOR AGREEMENT; MODIFICATION: No modifications or waiver of this
     Agreement, or of any provision thereof, shall be valid or binding, unless
     in writing and executed by both parties hereto. No waiver by either party
     of any breach of any term or provision of this Agreement shall be construed
     as a waiver of any succeeding breach of the same or any other term or
     provision.

WHEREOF, the parties have executed this Agreement as of the day and year first
written above.


/s/ Luke Huybrechts
- -------------------------------------
Luke Huybrechts


Optical Cable Corporation

By:  /s/s Randy Frazier
    ---------------------------------
Randy Frazier
Independent Board Member and
Member of the Compensation Committee

By:  /s/ John Holland
    ---------------------------------
John Holland
Independent Board Member and
Member of the Compensation Committee

                                      -6-
<PAGE>

                                 AMENDMENT TO
                      OPTICAL CABLE EMPLOYMENT AGREEMENT

     The foregoing Agreement hereby is amended as follows:

     The opening paragraph is amended to reflect the correct effective date of
November 1, 2000.

     Numbered Paragraph 2 on Page 1 is amended to reflect "The term of this
Agreement shall begin on November 1, 2001, and shall terminate on the 31/st/ day
of October 2003."

     Numbered Paragraph 3.a. is amended to reflect the commencement date of
employment under the Agreement as November 1, 2001.

                                     OPTICAL CABLE CORPORATION



Date:                                By: /s/ Randy Frazier
      -------------                      --------------------------------------
                                         Randy Frazier
                                         Independent Board Member and
                                         Member of the Compensation Committee



Date:                                By: /s/ John Holland
      -------------                      --------------------------------------
                                         John Holland
                                         Independent Board Member and
                                         Member of the Compensation Committee



Date:                                By: /s/ Luke J. Huybrechts
      -------------                      --------------------------------------
                                         Luke J. Huybrechts

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>6
<FILENAME>dex107.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.7

                                 LOAN AGREEMENT



FIRST UNION NATIONAL BANK
201 S. JEFFERSON STREET
Roanoke, Virginia  24011
(Hereinafter referred to as the "Bank")

OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA  24019
(Individually and collectively, "Borrower")


This Loan Agreement  ("Agreement") is entered into this 10th day of March, 1999,
by and between Bank and OPTICAL CABLE CORPORATION, a corporation organized under
the laws of the State of Virginia.

Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan")  evidenced by one or more  promissory note (whether one or more, the
"Note:) as follows:

     *  Working   Capital  Line  of  Credit  -  in  the   principal   amount  of
     $10,000,000.00  which is  evidenced  by the  Promissory  Note of even  date
     herewith  (the "Line of Credit  Note"),  under which  Borrower  may borrow,
     repay, and reborrow,  from time to time, so long as the total  indebtedness
     outstanding at any one time does not exceed the principal amount.  The Loan
     proceeds are to be used by Borrower solely for financing  working  capital.
     Bank's  obligation  to advance or  readvance  under the Line of Credit Note
     shall terminate if Borrower is in Default under the Line of Credit Note.

     * Line of Credit/Sweep + - in the principal amount of  $5,000,000.00  which
     is evidenced by the  Promissory  Note of even date  herewith  (the "Line of
     Credit Note"), under which Borrower may borrow,  repay, and reborrow,  from
     time to time, so long as the total indebtedness outstanding at any one time
     does not exceed the principal  amount.  The Loan proceeds are to be used by
     Borrower solely for financing working capital. Bank's obligation to advance
     or readvance  under the Line of Credit Note shall  terminate if Borrower is
     in Default under the Line of Credit Note.

The  Agreement  also  amends and  restates in its  entirety  that  certain  Loan
Agreement dated April 25, 1997.

This  Agreement  applies  to the loan and all Loan  Documents.  The terms  "Loan
Documents"  and  "Obligations,"  as used in this  Agreement,  are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this  Agreement as to Borrower,  "Subsidiary"  shall mean any  corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C.  ss. 101,  except that the term  "debtor'  therein shall be
substituted by term "Borrower" herein.

Relying upon the covenants, agreements, representations and warranties contained
in this  Agreement,  Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions  set forth herein,  and Bank and Borrower agree as
follows:

REPRESENTATIONS.  Borrower  represents  that from the date of this Agreement and
until  final  payment  in full of the  Obligations:  ACCURATE  INFORMATION.  All
information now and hereafter furnished to Bank is and will be true, correct and
complete.  Any such information  relating to Borrower's financial condition will
accurately  reflect  Borrower's  financial  condition as of the date(s) thereof,
(including  all  contingent  liabilities  of every type,  and  Borrower  further
represents that its financial condition has not changed materially or


                                   Page 1 of 4
<PAGE>

adversely since the date(s) of such documents. AUTHORIZATION; NON-CONTRAVENTION.
The  execution,  delivery  and  performance  by Borrower and any  guarantor,  as
applicable,  of this  Agreement and other Loan  Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and if necessary, by
making  appropriate  filings  with any  governmental  agency or unit and are the
legal,  binding,   valid  and  enforceable   obligations  of  Borrower  and  any
guarantors; and do not (i) contravene, or constitute (with or without the giving
of notice or lapse of time or both) a violation of any  provision of  applicable
law, a violation of the  organizational  documents of Borrower or any guarantor,
or a default under any agreement,  judgment,  injunction, order, decree or other
instrument binding upon or affecting  Borrower or any guarantor,  (ii) result in
the creation or  imposition  of any lien (other than the lien(s)  created by the
Loan Documents) on any of Borrower's or guarantor's  assets, or (iii) give cause
for the  acceleration  of any  obligations  of Borrower or any  guarantor to any
other creditor.  ASSET OWNERSHIP.  Borrower has good and marketable title to all
of the  properties  and assets  reflected  on the balance  sheets and  financial
statement supplied Bank by Borrower, and all such properties and assets are free
and clear of mortgages,  security deeds, pledges,  liens, charges, and all other
encumbrances,  except as  otherwise  disclosed  to Bank by  Borrower  in writing
("Permitted Liens"). To Borrower's knowledge,  no default has occurred under any
Permitted Liens and no claims or interest  adverse to Borrower's  present rights
in its properties and assets have arisen. DISCHARGE OF LIENS AND TAXES. Borrower
has duly  filed,  paid and/or  discharged  all taxes or other  claims  which may
become a lien on any of its  property or assets,  except to the extent that such
items are being  appropriately  contested in good faith and an adequate  reserve
for the payment thereof is being maintained. SUFFICIENCY OF CAPITAL. Borrower is
not, and after  consummation  of this  Agreement  and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the Loan,
will not be insolvent  within the meaning of 11 U.S.C.  ss. 101(32).  COMPLIANCE
WITH LAWS. Borrower is in compliance in all respects with all federal, state and
local laws,  rules and  regulations  applicable to its  properties,  operations,
business, and finances, including, without limitation, any federal or state laws
relating  to  liquor  (including  18  U.S.C.  ss.  3617 et  seq.)  or  narcotics
(including  21  U.S.C.  ss.  801 et seq.)  and/or  any  commercial  crimes;  all
applicable federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if applicable.  ORGANIZATION AND AUTHORITY. Each corporate or limited
liability  company Borrower and any guarantor,  as applicable,  is duly created,
validly  existing  and in good  standing  under  the  laws of the  state  of its
organization,  and  has  all  powers,  governmental  licenses,   authorizations,
consents and approvals  required to operate its business as now conducted.  Each
corporate or limited  liability  company Borrower and any guarantor,  if any, is
duly  qualified,  licensed  and in  good  standing  in each  jurisdiction  where
qualification  or  licensing  is required  by the nature of its  business or the
character and location of its property,  business or customers, and in which the
failure  to so  qualify or be  licensed,  as the case may be, in the  aggregate,
could  have a  material  adverse  effect on the  business,  financial  position,
results  of  operations,  properties  or  prospects  of  Borrower  or  any  such
guarantor.  NO LITIGATION.  There are no pending or threatened suits,  claims or
demands  against  Borrower or any guarantor that have not been disclosed to Bank
by Borrower in writing.

AFFIRMATIVE COVENANTS.  Borrower agrees that from the date of this Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent in writing: BUSINESS CONTINUITY.  Borrower shall conduct its business in
substantially  the same  manner and  locations  as such  business is now and has
previously  been  conducted.  MAINTAIN  PROPERTIES.   Borrower  shall  maintain,
preserve  and keep its property in good repair,  working  order and  conditions,
making all needed  replacements,  additions  and  improvements  thereto,  to the
extent  allowed by this  Agreement.  ACCESS TO BOOKS & RECORDS.  Borrower  shall
allow Bank, or its agents,  during normal business  hours,  access to the books,
records and such other documents of Borrower as Bank shall  reasonably  require,
and allow Bank to make copies  thereof at Bank's  expense.  INSURANCE.  Borrower
shall maintain  adequate  insurance  coverage with respect to its properties and
business  against  loss or damage of the  kinds and in the  amounts  customarily
insured  against by companies of established  reputation  engaged in the same or
similar businesses including,  without limitation,  commercial general liability
insurance,   workmen's   compensation   insurance,   and  business  interruption
insurance,  and upon all Collateral (as defined in the Loan Documents)  securing
the Obligations, such insurance as specified in the Loan Documents; all acquired
in such amounts and from such companies as Bank may reasonably  require.  NOTICE
OF DEFAULT AND OTHER NOTICES.  (a) Notice of Default.  Borrower shall furnish to
Bank immediately upon becoming aware of the existence of


                                   Page 2 of 4
<PAGE>

any  condition  or event  which  constitutes  a Default  (as defined in the Loan
Documents)  or any event  which,  upon the  giving of notice or lapse of time or
both, may become a Default,  written notice  specifying the nature and period of
existence  thereof and the action  which  Borrower is taking or proposes to take
with respect thereto. (b) Other Notices.  Borrower shall promptly notify Bank in
writing of (i) any material  adverse  change in its  financial  condition or its
business;  (ii) any  default  under any  material  agreement,  contract or other
instrument to which it is a party or by which any of its  properties  are bound,
or any acceleration of the maturity of any indebtedness owed by Borrower;  (iii)
any material  adverse  claim against or affecting  Borrower;  or any part of its
properties;  (iv) the  commencement  of,  any  material  determination  in,  any
litigation with any third party or any proceeding before any governmental agency
or unit affecting Borrower; and (v) at least thirty (30) days prior thereto, any
change in  Borrower's  name or  address  as shown  above,  and/or  any change in
Borrower's  structure.  COMPLIANCE WITH OTHER AGREEMENTS.  Borrower shall comply
with all terms and conditions  contained in this  Agreement,  and any other Loan
Documents, and swap agreements,  if applicable, as defined in the Note. Payments
of Debts.  Borrower  shall pay and  discharge  when due,  and before  subject to
penalty or further charge, and otherwise satisfy before maturity or delinquency,
all  obligations,  debts,  taxes,  and liabilities of whatever nature or amount,
except  those  which  Borrower  in good faith  disputes.  REPORTS  AND  PROXIES.
Borrower shall deliver to Bank,  promptly,  a copy of all financial  statements,
reports, notices, and proxy statements sent by Borrower to stockholders, and all
regular  or  periodic  reports  required  to  be  filed  by  Borrower  with  any
governmental agency or authority.  Other Financial  Information.  Borrower shall
deliver  promptly  such other  information  regarding  the  operation,  business
affairs,  and financial condition of Borrower which Bank may reasonably request.
ESTOPPEL CERTIFICATE.  Borrower, within fifteen (15) days after request by Bank,
will furnish a written  statement duly  acknowledged of the amount due under the
Loan and whether  offsets or defenses  exist  against the  Obligations.  DEPOSIT
RELATIONSHIP.  Borrower will maintain its primary  depository  relationship with
Bank. LIFE INSURANCE.  Maintain no less than  $2,000,000.00 of life insurance on
Robert Kopstein.

NEGATIVE  COVENANTS.  Borrower  agrees that from the date of this  Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent  in  writing:  GOVERNMENT  INTERVENTION.  Borrower  shall not permit the
assertion  or  making  of any  seizure,  vesting  or  intervention  by or  under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective  business or such
business is curtailed or materially impaired. PREPAYMENT OF OTHER DEBT. Borrower
shall not  retire  any  long-term  debt  entered  into prior to the date of this
Agreement  at a date in advance  of its legal  obligation  to do so.  DEFAULT ON
OTHER  CONTRACTS  OR  OBLIGATIONS.  Borrower  shall not default on any  material
contract  with or  obligations  when  due to a third  party  or  default  in the
performance of any obligation to a third party incurred for money borrowed in an
amount in excess of $100,000.00. JUDGMENT ENTERED. Borrower shall not permit the
entry of any monetary judgment or the assessment against,  the filing of any tax
lien against,  or the issuance of any writ of garnishment or attachment  against
any property of or debts due Borrower in an amount in excess of  $50,000.00  and
that is not  discharged  or  execution  is not  stayed  within 30 days of entry.
CHANGE OF CONTROL.  Borrower shall not make a material  change of ownership that
effectively  changes  control  of  Borrower.  GUARANTEES.   Borrower  shall  not
guarantee or otherwise become responsible for obligations of any other person or
entity. ENCUMBRANCES.  Borrower shall not create, assume, or permit to exist any
mortgage,   security  deed,  deed  of  trust,  pledge,  lien,  change  or  other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than:  (i) security  interests  required by the Loan  Documents;  (ii) liens for
taxes  contested  in good  faith;  (iii)  liens  accruing  by law  for  employee
benefits; or (iv) Permitted Liens. RETIRE OR REPURCHASE CAPITAL STOCK. Retire or
otherwise  acquire its capital stock in an amount  greater than  $15,000,000.00.
Any such  acquisition  of capital stock may be paid for from working  capital or
other sources deemed appropriate by the officers of the corporation.

FINANCIAL REPORTS.  Borrower agrees to the following provisions(s) from the date
of this  Agreement  and until final payment in full of the  Obligations,  unless
Bank shall otherwise consent in writing:  ANNUAL FINANCIAL STATEMENTS.  Borrower
shall  deliver to Bank,  within 120 days  after the close of each  fiscal  year,
audited financial statements  reflecting its operations during such fiscal year,
including,  without  limitation,  a balance sheet, profit and loss statement and
statement of cash flows, with supporting  schedules;  all in reasonable  detail,
prepared in conformity with generally accepted accounting principles, applied on
a


                                   Page 3 of 4
<PAGE>

basis  consistent with that of the preceding year. All such statements  shall be
examined by an independent  certified public accountant  acceptable to Bank. The
opinion of such independent  certified public accountant shall not be acceptable
to Bank if qualified due to any  limitation  in scope  imposed by Borrower.  Any
other   qualification  of  the  opinion  by  the  accountant  shall  render  the
acceptability of the financial  statements subject to Bank's approval.  PERIODIC
FINANCIAL  STATEMENTS.  Borrower  shall  deliver  to  Bank  quarterly  unaudited
management-prepared  financial  statements,  including,  without  limitation,  a
balance  sheet,  profit and loss  statement,  and statement of cash flows,  with
supporting schedules, as soon as available and in any event within 60 days after
the close of each such period; all in reasonable  detail.  Such statements shall
be  certified  as to their  correctness  by a  principal  financial  officer  of
Borrower.

CONDITONS  PRECEDENT.  The obligations of Bank to make the Loan and any advances
pursuant to this  Agreement are subject to the following  conditions  precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.

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


                                                     OPTICAL CABLE CORPORATION

Corporate                                            By: /s/ Robert Kopstein
Seal                                                    ------------------------
                                                         Robert Kopstein
                                                         President


                       TAXPAYER IDENTIFICATION NUMBER(S):

                                            OPTICAL CABLE CORPORATION 54-1237042

                                                     FIRST UNION NATIONAL BANK

                                                     By: /s/ Susan Doyle
                                                        ------------------------
                                                         Susan Doyle
                                                         Senior Vice President

49548

                                   Page 4 of 4
<PAGE>

                               December 15, 1999



Mr. Ken Harber, Vice President
Optical Cable Corporation
P. O. Box 11967
Roanoke, Virginia  24022-1967

Re:  Loan Agreement Dated April 25, 1997

Dear Ken:

     Per your phone conversation with Susan Doyle, you have advised First Union
of your desire to repurchase additional shares of common stock from working
capital and other sources deemed appropriate by the officers of the corporation.
Whereas the current loan agreement, as amended, limits the purchase to
$15,000,000, you have requested an amendment to the loan agreement to increase
this limit to $20,000,000.  Our consent to this increase is hereby granted.

     We will follow up this letter with a formal amendment to the loan
agreement.  Please have Mr. Kopstein sign the acknowledgement line below and
return to First Union.  A return envelope is provided for your convenience.
Should you have any questions, please feel free to contact me at 563-6667.

                                     Sincerely,

                                     /s/ William C. Moses

                                     William C. Moses
                                     Vice President

ACKNOWLEDGEMENT OF AMENDMENT:

Optical Cable Corporation


By:  /s/ Robert Kopstein           Date:  12/23/99
   -----------------------------         ---------------------------

cc:  Susan K. Doyle
<PAGE>

                                October 3, 2001


Mr. Neil Wilkin, Senior Vice President
Chief Financial Officer
Optical Cable Corporation
P. O. Box 11967
Roanoke, Virginia  24022-1967

Re:  Loan Agreement Dated March 10, 1999, $5,000,000 and $10,000,000 Promissory
     Notes Dated March 10, 1999, Security Agreements Dated March 13, 1996 and
     April 25, 1997 respectively, as renewed and amended (collectively, the
     "First Union Loan Documents")

Dear Neil:

     Thank you for meeting with Brenda Vaughan, Marvin Huffman and me last
Tuesday, September 25, 2001.  Prior to and during our meeting, we discussed
several important business and financial points concerning the financial
performance of Optical Cable Corporation ("Optical Cable") and compliance with
the First Union Loan Documents.

     You asked us to amend or waive two Events of Default that occurred and
remain outstanding since filing your 10Q on September 14, 2001 for the period
ending July 31, 2001.  First, by letter dated December 15, 1999, the limits of
repurchase of common stock were raised from $15,000,000 to $20,000,00.  It has
come to our attention the $20,000,000 limit was exceeded.  Second, the Loan
Agreement specifies the use of loan proceeds be limited to working capital
purposes.  Working capital purposes are limited to short term uses in the
ordinary course of business of Optical Cable, and do not include purchase of
common stock of the Company for the Treasury.  These Events of Default remain
outstanding.

     During our meeting we asked for information that would help us respond to
your request to waive the Events of Default.  Included in our information
request is a financial forecast for the quarter ending October 31, 2001, budget
for the first half of fiscal 2002 and year end, if possible, plus a precise
final count of the repurchased shares.  We have also determined that we need
monthly financial statements for August and September as well as for succeeding
months on an ongoing basis.

     Through the close of business October 1, 2001 the combined balance
outstanding on the $5 million and $10 million loans is $7,112,000.00.  The
balance of the $5 million Sweep+ line is $2,612,000.00 after transferring
$4,500,000 to the $10 million line.  The transfer was effective September 5,
2001.  Also, during our meeting you indicated the need for minimal additional
usage under the lines as the last stock redemption occurred on Friday, September
21, 2001.  According to our records there was a wire transfer in the amount of
<PAGE>

$272,800 to First Star Bank on September 26, which appears to be settlement of
the September 21, 2001 stock purchase.

     Since Events of Default remain outstanding, we are limiting the
availability under Optical Cable's lines to a level consistent with its working
capital needs.  Effective Thursday, October 4, 2001, the combined, total
outstanding under the two lines of credit is limited to $9,500,000.
Notwithstanding the outstanding defaults, First Union National Bank ("FUNB")
will permit a one time only use of up to $500,000 under the lines of credit for
purposes other than working capital purposes.  This non-working capital advance
shall be repaid as soon as possible.  We reserve all other rights under and in
connection with the First Union Loan Documents including the right to accelerate
obligations under the First Union Loan Documents.

     In consideration of First Union's agreement to permit continued usage of
the line as described above, please execute this letter to confirm that Optical
Cable does not have any defenses to the obligations under the First Union Loan
Documents, that Optical Cable does not hold any claims against First Union or
its officers, directors, employees or affiliates, and that Optical Cable waives
any claims it may have against First Union or its officers, directors, employees
or affiliates.

                                     Sincerely,

                                     /s/ Susan K. Doyle

                                     Susan K. Doyle
                                     Senior Vice President

By execution of this letter, Optical Cable Corporation acknowledges and agrees
to all terms of the foregoing letter.

Optical Cable Corporation

By:  /s/ Kenneth W. Harber
   ------------------------------

Name:  Kenneth W. Harber
      ---------------------------

Title:  VP Finance
      ---------------------------

Date:   10/4/2001
      ---------------------------
<PAGE>




October 30, 2001

Mr. Kenneth Harber, Vice President, Finance
Mr. Neil Wilkin, Senior Vice President & CFO
Optical Cable Corporation
P. O. Box 11967
Roanoke, Virginia 24022-1967

Re:  Loan Agreement Dated March 10, 1999, a letter modification to the Loan
Agreement dated December 15, 1999; letter agreement dated October 3, 2001,
$5,000,000 and $10,000,000 Promissory Notes Dated March 10, 1999; and Security
Agreements Dated March 13, 1996 and April 25, 1997 respectively, all as renewed
and amended (collectively, the "First Union Loan Documents")

Dear Ken and Neil:

Reference is made to the First Union Loan Documents cited above between Optical
Cable Corporation (the "Borrower") and First Union National Bank (the "Bank").
The First Union Loan Documents and all other documents executed and delivered in
connection therewith are collectively referred to herein as the "Loan
Documents".  All capitalized terms used but not defined herein shall have the
meanings assigned in the Loan Documents.

     (1)  The Loan Agreement dated March 10, 1999 provides:

               Borrower shall not "Retire or otherwise acquire its capital stock
               in an amount greater than $15,000,000."  This limitation was
               subsequently increased to $20,000,000 in a letter dated December
               15, 1999.

          Based on information provided by the Borrower, stock repurchased
          amounted to $24,179,403.26 through September 20, 2001, exceeding the
          $20,000,000 limitation on August 16, 2001.  The Borrower has requested
          the Bank's waiver of this violation and amendment of the limitation to
          $25,000,000.  The Bank does hereby waive the Borrower's defaults under
          this provision, subject to Borrower's execution of and return of this
          letter confirming its consent to the terms contained herein.  The Loan
          Agreement will be modified to provide that the Retire or Repurchase
          Capital Stock section in the Negative Covenants paragraph will be
          deleted in its entirety and replaced with the following:
<PAGE>

October 30, 2001
Page 2


          Retire or Repurchase Capital Stock.  Borrower shall not retire or
          otherwise acquire any of its capital stock at any time following
          September 20, 2001.  If Borrower reduces the combined outstanding
          obligations under both the $5,000,000 line of credit and the
          $10,000,000 line of credit to $0.00 for a period of 30 consecutive
          days, then Borrower may spend up to $820,596.74 to retire or acquire
          its capital stock.

     (2)  The Loan Agreement dated March 10, 1999 also provides the following
          requirement for each Line of Credit:

               "The Loan proceeds are to be used by Borrower solely for
               financing working capital."

          Based on the schedule of purchases provided by the Borrower, stock
          repurchased during the Borrower's third and fourth quarters of fiscal
          2001 (from July 11, 2001 through and including September 20, 2001)
          amounted to $7,711,164.62.  These purchases were largely financed
          through borrowings under the $10,000,000 line of credit and the
          $5,000,000 line of credit.  Borrower acknowledges that this is not a
          permitted use of the loan proceeds.  The Borrower has requested the
          Bank's waiver, and the Bank does hereby waive the Borrower's default
          under this provision, subject to Borrower's execution of and return of
          this letter.

These waivers are limited to the defaults recited above and shall not be
construed to be a waiver of any subsequent default under the referenced
provisions, or of any existing or future defaults under any other provision of
any Loan Document.

First Union will continue to limit the availability under Optical Cable's lines
to a level consistent with its working capital needs.  The limitation of the
combined availability under the $10,000,000 line of credit and the $5,000,000
line of credit to a maximum combined amount of $9,500,000 will continue for the
balance of the term of the lines of credit unless otherwise agreed to by Bank in
writing.  The purpose of each facility will continue to be Working Capital.
Working capital purposes are limited to short term uses in the ordinary course
of business of Optical Cable, and do not include purchase of common stock of the
Company for the Treasury.

The foregoing modifications will be incorporated in an amended and restated loan
agreement which will be executed by Bank and Borrower.

The Borrower, by signature below, represents and warrants that there exist no
defaults or event of default under the Loan Documents other than those
specifically waived herein, that the Loan Documents are in full force and
effect, and that Borrower does not have any defenses to its obligations under
the Loan Documents nor any claims against Bank.
<PAGE>

October 30, 2001
Page 3

Please evidence your acceptance of the terms of this waiver by signing and
returning to the Bank a copy of this letter bearing original authorized
signature of each of the parties indicated.

Sincerely,


Susan K. Doyle
Senior Vice President



By execution of this letter, Optical Cable Corporation acknowledges and agrees
to all terms of the foregoing letter.

Optical Cable Corporation


By:  /s/ Kenneth W. Harber
    --------------------------------

Name:  Kenneth W. Harber
     -------------------------------

Title:  VP Finance
      ------------------------------

Date:    11/13/01
      ------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>7
<FILENAME>dex108.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.8
[FIRST UNION LOGO]


                               SECURITY AGREEMENT

                                                                  April 25, 1997

Optical Cable Corporation, a Virginia Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(Individually and collectively "Debtor")

First Union National Bank of Virginia
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

For value  received and to secure the payment and  performance of the Promissory
Note  executed by the Debtor of even date  herewith,  in the original  principal
amount  of  $10,000,000.00,  payable  to  Bank,  and any  extensions,  renewals,
modifications or novations thereof (the "Note"), this Security Agreement and the
other  Loan  Documents,  and any other  obligations  of  Debtor to Bank  however
created,  arising  or  evidenced,   whether  direct  or  indirect,  absolute  or
contingent,  now  existing or  hereafter  arising or  acquired,  including  swap
agreements (as defined in 11 U.S.C. ss. 101), future advances, and all costs and
expenses incurred by Bank to obtain, preserve,  perfect and enforce the security
interest  granted  herein and to  maintain,  preserve  and collect the  property
subject to the security  interest  (collectively,  "Obligations"), Debtor hereby
grants to Bank a  continuing  security  interest in and lien upon the  following
described property, now owned or hereafter acquired, any additions,  accessions,
or  substitutions  thereof and thereto  (including but not limited to investment
property and  security  entitlements),  and all cash and  non-cash  proceeds and
products thereof (collectively, "Collateral"):

All  accounts,  contract  rights,  inventory,  furniture,  fixtures,  machinery,
equipment and general intangibles now existing or hereafter arising and proceeds
and products thereof.

Debtor hereby represents and agrees that:

OWNERSHIP. Debtor owns the Collateral or Debtor will purchase and acquire rights
in the  Collateral  within ten days of the date advances are made under the Loan
Documents. If Collateral is being acquired with the proceeds of an advance under
the Loan Documents,  Debtor authorizes Bank to disburse proceeds directly to the
seller  of the  Collateral.  The  Collateral  is free and  clear  of all  liens,
security  interests,  and claims except those previously  reported in writing to
Bank,  and  Debtor  will  keep the  Collateral  free and clear  from all  liens,
security interests and claims, other than those granted to Bank.

NAME AND  OFFICES.  There has been no change in the name of Debtor,  or the name
under which Debtor conducts  business,  within the 5 years preceding the date of
execution  of this  Security  Agreement  and Debtor has not moved its  executive
offices or residence  within the 5 years preceding the date of execution of this
Security  Agreement  except as  previously  reported  in  writing  to Bank.  The
taxpayer identification number of Debtor as provided herein is correct.

TITLE/TAXES. Debtor has good and marketable title to Collateral and will warrant
and defend same against all claims.  Debtor will not  transfer,  sell,  or lease
Collateral  (except in the ordinary  course of  business).  Debtor agrees to pay
promptly all taxes and assessments upon or for the use of Collateral and on this
Security Agreement.  At its option,  Bank may discharge taxes,  liens,  security
interests  or other  encumbrances  at any time  levied or placed on  Collateral.
Debtor agrees to reimburse  Bank, on demand,  for any such payment made by Bank.
Any amounts so paid shall be added to the Obligations.
<PAGE>

WAIVERS. Debtor waives presentment,  demand, protest, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity.  Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a counterclaim, or otherwise, any
claims  Debtor may have  against  any seller or lessor  that  provided  personal
property or services  relating to any part of the Collateral.  Debtor waives all
exemptions and homestead rights with regard to the Collateral. Debtor waives any
and all  rights  to  notice  or to  hearing  prior to  Bank's  taking  immediate
possession or control of any Collateral, and to any bond or security which might
be required by  applicable  law prior to the exercise of any of Bank's  remedies
against any Collateral.

EXTENSIONS, RELEASES. Debtor agrees that Bank may extend, renew or modify any of
the Obligations and grant any releases,  compromises or indulgences with respect
to any security for the Obligations, or with respect to any party liable for the
Obligations,  all without  notice to or consent of Debtor and without  affecting
the liability of Debtor or the enforceability of this Security Agreement.

NOTIFICATIONS  OF CHANGE.  Debtor  will  notify Bank in writing at least 30 days
prior to any change in: (i) Debtor's chief place of business  and/or  residence;
(ii)  Debtor's  name or  identity;  or (iii)  Debtor's  corporate/organizational
structure. Debtor will keep Collateral at the location(s) previously provided to
Bank until such time as Bank  provides  written  advance  consent to a change of
location.  Debtor  will bear the cost of  preparing  and  filing  any  documents
necessary to protect Bank's liens.

COLLATERAL  CONDITION AND LAWFUL USE.  Debtor  represents  that Collateral is in
good repair and condition and that Debtor shall use  reasonable  care to prevent
Collateral from being damaged or depreciating.  Debtor shall immediately  notify
Bank of any material loss or damage to  Collateral.  Debtor shall not permit any
item of  equipment  to become a fixture to real estate or an  accession to other
personal  property.  Debtor  represents it is in compliance in all respects with
all  federal,  state and local laws,  rules and  regulations  applicable  to its
properties,  Collateral,  operations,  business, and finances, including without
limitation,  any federal or state laws  relating to liquor  (including 18 U.S.C.
ss. 3617, et seq.) Or narcotics  (including 21 U.S.C.  ss. 801, et seq.) And all
applicable  federal,  state and local laws, and regulations  intended to protect
the environment.

RISK OF LOSS AND  INSURANCE.  Debtor shall bear all risk of loss with respect to
the  Collateral.  The injury to or loss of Collateral,  either partial or total,
shall not release Debtor from payment or other performance hereof. Debtor agrees
to obtain and keep in force casualty and hazard  insurance on Collateral  naming
Bank as loss payee. Such insurance is to be in form and amounts  satisfactory to
Bank.  All such  policies  shall  provide to Bank a minimum  of 30 days  written
notice of  cancellation.  Debtor shall furnish to Bank such  policies,  or other
evidence of such policies  satisfactory  to Bank.  Bank is  authorized,  but not
obligated,  to purchase  any or all  insurance  or "Single  Interest  Insurance"
protecting  such interest as Bank deems  appropriate  against such risks and for
such coverage and for such amounts, including either the loan amount or value of
the Collateral,  all at its discretion,  and at Debtor's expense. In such event,
Debtor agrees to reimburse  Bank for the cost of such insurance and Bank may add
such cost to the  Obligations.  Debtor shall bear the risk of loss to the extent
of any  deficiency in the effective  insurance  coverage with respect to loss or
damage to any of the  Collateral.  Debtor hereby  assigns to Bank to proceeds of
all such  insurance and directs any insurer to make  payments  directly to Bank.
Debtor hereby appoints Bank its  attorney-in-fact,  which  appointment  shall be
irrevocable  and coupled with any interest  for so long as the  Obligations  are
unpaid,  to file proof of loss and/or any other forms  required to collect  from
any  insurer any amount due from any damage or  destruction  of  Collateral,  to
agree to and  find  Debtor  as to the  amount  of said  recovery,  to  designate
payee(s) of such recovery,  to grant releases to insurer,  to grant  subrogation
rights to any insurer, and to endorse any settlement check or draft.


                                     Page 2
<PAGE>

Debtor  agrees  not to  exercise  any of the  foregoing  powers  granted to Bank
without the Bank's prior written consent.

ADDITIONAL COLLATERAL. If at any time Collateral is unsatisfactory to Bank, then
on demand of Bank, Debtor shall immediately  furnish such additional  Collateral
satisfactory to Bank to be held by Bank as if originally  pledged  hereunder and
shall execute such additional  security  agreements and financing  statements as
requested by Bank.

FINANCING  STATEMENTS.  No financing  statement (other than any filed by Bank or
disclosed  above)  covering any of Collateral or proceeds  thereof is on file in
any public filing office.  This Security  Agreement,  or a copy thereof,  or any
financing  statement  executed  hereunder  may be recorded.  On request of Bank,
Debtor will execute one or more  financing  statements in form  satisfactory  to
Bank and will pay all costs and  expenses  of filing the same or of filing  this
Security Agreement in all public filing offices,  where filing is deemed by Bank
to be desirable.  Bank is authorized to file  financing  statements  relating to
Collateral  without Debtor's  signature where authorized by law. Debtor appoints
Bank as its  attorney-in-fact  to execute such documents necessary to accomplish
perfection  of Bank's  security  interest.  The  appointment  is coupled with an
interest and shall be irrevocable as long as any Obligations remain outstanding.
Debtor  further  agrees to take such other actions as might be requested for the
perfection,  continuation  and assignment,  in whole or in part, of the security
interests granted herein. If certificates are issued or outstanding as to any of
the Collateral,  Debtor will cause the security interests of Bank to be properly
protected, including perfection of notation thereon.

LANDLORD/MORTGAGE  WAIVERS.  Debtor shall cause each  mortgagee of real property
owned by Debtor and each landlord of real  property  leased by Debtor to execute
and deliver instruments satisfactory in form and substance to Bank by which such
mortgagee or landlord waives its rights, if any, in the Collateral

STOCK,  DIVIDENDS.  If, with respect to any security pledged hereunder,  a stock
dividend is declared,  any stock split made or right to subscribe is issued, all
the certificates for the shares representing such stock dividend, stock split or
right to subscribes will be immediately delivered, duly endorsed, to the Bank as
additional  collateral,  and any cash or non-cash proceeds and products thereof,
including  investment  property and security  entitlements  will be  immediately
delivered  to Bank.  If  Debtor  has  granted  to Bank a  security  interest  in
securities, Debtor acknowledges that such grant includes all investment property
and security entitlements,  now existing or hereafter arising,  relating to such
securities.  In addition, Debtor agrees to execute such notices and instructions
to securities intermediaries as Bank may reasonably request.

CONTRACTS,  CHATTEL PAPER, ACCOUNTS,  GENERAL INTANGIBLES.  Debtor warrants that
Collateral  consisting of contract rights,  chattel paper,  accounts, or general
intangibles is (i) genuine and  enforceable in accordance  with its terms except
as  limited  by  law;  (ii)  not  subject  to any  defense,  set-off,  claim  or
counterclaim  of a material  nature against Debtor except as to which Debtor has
notified Bank in writing;  and (iii) not subject to any other circumstances that
would impair the validity,  enforceability,  value, or amount of such Collateral
except as to which Debtor has notified Bank in writing.  Debtor shall not amend,
modify or supplement any lease, contract or agreement contained in Collateral or
waive any provision therein, without prior written consent of Bank.

ACCOUNT  INFORMATION.  From time to time,  at the Bank's  request,  Debtor shall
provide Bank with schedules  describing  all accounts and  contracts,  including
customers'  addresses,  credited or acquired by Debtor and at the Bank's request
shall execute and deliver  written  assignments of contracts and other documents
evidencing  such  accounts and contracts to Bank.  Together with each  schedule,
Debtor shall,  if requested by Bank,  furnish Bank with copies of Debtor's sales


                                     Page 3
<PAGE>

journals,  invoices,  customer  purchase orders or the equivalent,  and original
shipping  or  delivery  receipts  for all goods sold,  and Debtor  warrants  the
genuineness thereof.

ACCOUNT AND CONTRACT DEBTORS.  After a Default occurs, Bank shall have the right
to notify  the  account  and  contract  debtors  obligated  on any or all of the
Collateral to make payment thereof directly to Bank and Bank may take control of
all proceeds of any such Collateral, which rights Bank may exercise at any time.
The cost of such  collection  and  enforcement,  including  attorneys'  fees and
expenses,  shall be borne solely by Debtor  whether the same is incurred by Bank
or Debtor.  After a Default  occurs,  upon  demand of Bank,  Debtor  will,  upon
receipt  of all  checks,  drafts,  cash and  other  remittances  in  payment  on
Collateral,  deposit the same in a special  bank account  maintained  with Bank,
over which Bank also has the power of withdrawal.

If a Default  occurs,  no discount,  credit,  or allowance   shall be granted by
Debtor to any account or contract  debtor and no return of merchandise  shall be
accepted by Debtor without Bank's  consent.  Bank may, after Default,  settle or
adjust  disputes and claims directly with account  contract  debtors for amounts
and upon terms  that Bank  considers  advisable,  and in such  cases,  Bank will
credit the Obligations  with the net amounts  received by Bank,  after deducting
all of the expenses incurred by Bank. Debtor agrees to indemnify and defend Bank
and hold it harmless with respect to any claim or proceeding  arising out of any
matter related to collection of Collateral.

GOVERNMENT  CONTRACTS.  If any Collateral covered hereby arises from obligations
due  to  Debtor  from  any  governmental  unit  or  organization,  Debtor  shall
immediately  notify  Bank in writing  and  execute  all  documents  and take all
actions  demanded by Bank to ensure  recognition  by such  governmental  unit or
organization of the rights of Bank in the Collateral.

INVENTORY.  So long as no Default has  occurred,  Debtor shall have the right in
the regular course of business,  to process and sell Debtor's inventory,  unless
Bank shall hereafter  otherwise direct in writing.  Upon demand of Bank,  Debtor
will, upon receipt of all checks, drafts, ash and other remittances,  in payment
of Collateral sold,  deposit the same in a special bank account  maintained with
Bank, over which Bank also has the power of withdrawal. Debtor shall comply with
all federal, state, and local laws, regulations,  rulings, and orders applicable
to Debtor or its assets or  business,  in all  respects.  Without  limiting  the
generality of the previous  sentence,  Debtor shall comply with all requirements
of the federal Fair Labor  Standards  Act in the conduct of its business and the
production of inventory.  Debtor shall notify Bank  immediately of any violation
by Debtor of the Fair Labor  Standards Act, and a failure of Debtor to so notify
Bank shall  constitute  a  continuing  representation  that all  inventory  then
existing has been produced in compliance with the Fair Labor Standards Act.

INSTRUMENTS,  CHATTEL PAPER.  Any Collateral that is instruments,  chattel paper
and negotiable  documents will be properly  assigned to, deposited with and held
Bank, unless Bank shall hereafter  otherwise direct or consent in writing.  Bank
may, without notice,  before or after maturity of the Obligations,  exercise any
or all rights of collection,  conversion,  or exchange and other similar rights,
privileges and options  pertaining to  Collateral,  but shall have no duty to do
so.

COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral  pledged  except as set forth  herein;  and by way of
explanation and not by way of limitation,  Bank shall incur no liability for any
of the following:  (i) loss or depreciation of Collateral  (unless caused by its
willful  misconduct),  (ii) its  failure  to  present  any paper for  payment or
protest,  to protest or give  notice of  nonpayment,  or any other  notice  with
respect to any paper or Collateral, or (iii) its failure to present or surrender
for redemption,  conversion or exchange any bond, stock, paper or other security
whether in  connection  with any  merger,  consolidation,  recapitalization,  or
reorganization,  arising out of the refunding of the original  security,  or for
any other  reason,  or its failure to notify any party  hereto  that  Collateral
should be so presented or surrendered.


                                     Page 4
<PAGE>

TRANSFER OF  COLLATERAL.  The Bank may assign its right in the Collateral or any
part  thereof to any  assignee who shall  thereupon  become  vested with all the
powers and rights  herein  given to the Bank with  respect  to the  property  so
transferred and delivered, and the Bank shall thereafter be forever relieved and
fully   discharged   from  any  liability  with  respect  to  such  property  so
transferred,  but with respect to any property not so transferred the Bank shall
retain all rights and powers hereby given.

SUBSTITUTE COLLATERAL.  With prior written consent of Bank, other Collateral may
be  substituted  for the original  Collateral  herein in which event all rights,
duties,  obligations,  remedies and security  interests provided for, created or
granted shall apply fully to such substitute Collateral.

INSPECTION,  BOOKS AND  RECORDS.  Debtor  will at all times  keep  accurate  and
complete  records  covering  each item of  Collateral,  including  the  proceeds
therefrom.  Bank, or any of its agents, shall have the right, at intervals to be
determined  by Bank and  without  hindrance  or delay,  to inspect,  audit,  and
examine the Collateral and to make extracts from the books,  records,  journals,
orders, receipts, correspondence and other data relating to Collateral, Debtor's
business or any other transaction between the parties hereto. Debtor will at its
expense furnish Bank copies thereof upon request.

CROSS COLLATERALIZATION  LIMITATION. As to any other existing or future consumer
purpose loan made by Bank to Debtor,  within the meaning of the Federal Consumer
Credit  Protection  Act, Bank  expressly  waives any security  interest  granted
herein in  Collateral  that Debtor uses as a principal  dwelling  and  household
goods.

ATTORNEY'S  FEES AND OTHER COSTS OF  COLLECTION.  Debtor shall pay all of Bank's
reasonable  expenses  incurred in enforcing this Agreement and in preserving and
liquidating  Collateral,  including but not limited to, reasonable  arbitration,
paralegals', attorneys' and experts' fees and expenses, whether incurred without
the  commencement  of a  suit,  in any  trial,  arbitration,  or  administrative
proceeding, or in any appellate or bankruptcy proceeding.

DEFAULT.  If any of the  following  occurs,  a default  ("Default")  under  this
Security Agreement shall exist: (i) The failure of timely payment or performance
of any of the Obligations or a default under any Loan Document;  (ii) Any breach
of any  representation  or agreement  contained or referred to in this  Security
Agreement or other Loan Document;  (iii) Any loss, theft, substantial damage, or
destruction  of  Collateral  not  fully  covered  by  insurance,  or as to which
insurance proceeds are not remitted to Bank within 30 days of the loss; any sale
(except the sale of inventory in the ordinary  course of  business),  lease,  or
encumbrance of any of collateral  without prior written  consent of Bank; or the
making of any levy,  seizure,  or attachment  on or of  Collateral  which is not
removed  within 10 days;  or (iv) the death of,  appointment  of  guardian  for,
dissolution  of,  termination of existence of, loss of good standing  status by,
appointment  of a receiver for,  assignment  for the benefit of creditors of, or
commencement  of any bankruptcy or insolvency  proceeding by or against  Debtor,
its Subsidiaries or Affiliates ("Affiliate" shall have the meaning as defined in
11 U.S.C.  ss. 101; and  "Subsidiary"  shall mean any  corporation of which more
than 50% of the  issued  and  outstanding  voting  stock is  owned  directly  or
indirectly by Debtor), if any, or any general partner of or the holder(s) of the
majority ownership interests in Debtor or any party to the Loan Documents.

REMEDIES ON DEFAULT  (INCLUDING POWER OF SALE). If a Default occurs,  all of the
Obligations shall be immediately due and payable,  without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code.  Without  limitation  thereto,  Bank shall have the  following  rights and
remedies:  (i) to take  immediate  possession of  Collateral,  without notice or
resort to legal  process,  and for such  purpose,  to enter upon any premises on
which  Collateral  or any part  thereof may be  situated  and to remove the same
therefrom,  or, at its option,  to render the Collateral  unusable or dispose of
said Collateral on Debtor's premises; (ii) to require


                                     Page 5
<PAGE>

Debtor to assemble the Collateral and make it available to Bank at a place to be
designated  by Bank;  (iii) to exercise  its right of set-off or bank lien as to
any monies of Debtors deposited in demand, checking, time, savings,  certificate
of deposit or other  accounts  of any nature  maintained  by Debtor with Bank or
Affiliates of Bank, without advance notice,  regardless of whether such accounts
are general or special; (iv) to dispose of Collateral,  as a unit or in parcels,
separately or with any real property interests also securing the Obligations, in
any county or place to be selected by Bank, at either private or public sale (at
which  public  sale  bank  may be the  purchaser)  with or  without  having  the
Collateral  physically present at said sale. Any notice of sale,  disposition or
other  action by Bank  required  by law and sent to Debtor at  Debtor's  address
shown  above,  or at such  other  address  of debtor as may from time to time be
shown on the  records  of  Bank,  at least 5 days  prior to such  action,  shall
constitute  reasonable  notice to Debtor.  Notice  shall be deemed given or sent
when mailed postage prepaid to Debtor's address as provided  herein.  Bank shall
be  entitled  to apply  the  proceeds  of any sale or other  disposition  of the
Collateral,  and the  payments  received  by  Bank  with  respect  to any of the
Collateral,  to the  Obligations in such order and manner as Bank may determine.
Collateral that is subject to rapid declines in value and is customarily sold in
recognized  markets  may be disposed of by Bank in a recognized  market for such
collateral without providing notice of sale.

REMEDIES  ARE  CUMULATIVE.  No failure on the part of Bank to  exercise,  and no
delay in exercising,  any right,  power or remedy  hereunder  shall operate as a
waiver thereof,  nor shall any single or partial  exercise by Bank or any right,
power or remedy hereunder  preclude any or other further exercise thereof or the
exercise  of any right,  power or  remedy.  The  remedies  herein  provided  are
cumulative and are not exclusive of any remedies  provided by law, in equity, or
in other Loan Documents.

MISCELLANEOUS.  (i) AMENDMENTS AND WAIVERS. No waiver, amendment or modification
of any provision of this Security Agreement shall be valid unless in writing and
signed by an officer of Bank.  No waiver by Bank of any Default shall operate as
a waiver of any  other  Default  or of the same  Default  on a future  occasion.
Neither the failure of, nor any delay by, Bank in exercising any right, power or
privilege granted pursuant to this Security  Agreement shall operate as a waiver
thereof,  nor shall a single or partial  exercise  thereof preclude any other or
further exercise of any other right,  power or privilege.  (ii) ASSIGNMENT.  All
rights of Bank hereunder are freely  assignable,  in whole or in part, and shall
inure to the benefit of and be enforceable by Bank, its successors,  assigns and
affiliates.  Debtor shall not assign its rights and interest  hereunder  without
the prior written  consent of Bank,  and any attempt by Debtor to assign without
Bank's prior written consent is null and void. Any assignment  shall not release
Debtor from the  Obligations.  This  Security  Agreement  shall be binding  upon
Debtor,  and the heirs,  personal  representatives,  successors,  and assigns of
Debtor.  (iii)  APPLICABLE  LAW:  CONFLICT  BETWEEN  DOCUMENTS.   This  Security
Agreement  shall be  governed  by and  construed  under the laws of the state in
which the  office  of Bank as stated  above is  located  without  regard to that
state's  conflict of laws  principles.  If any terms of this Security  Agreement
conflict with the terms of any commitment letter or loan proposal,  the terms of
this Security  Agreement shall control.  (iv)  JURISDICTION.  Debtor irrevocably
agrees to non-exclusive  personal  jurisdiction in the state in which the office
of Bank as stated above is located.  (v) SEVERABILITY.  If any provision of this
Security  Agreement shall be prohibited by or invalid under applicable law, such
provision  shall be  ineffective  but only to the extent or such  prohibition or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining  provisions of this Security Agreement.  (vi) NOTICES.  Any notices to
Debtor shall be sufficiently given. If in writing and mailed or delivered to the
address of Debtor shown above or such other address as provided  hereunder;  and
to Bank,  if in writing and mailed or delivered to Bank's  office  address shown
above or such other address as Bank may specify in writing from time to time. In
the event that the Debtor changes  Debtor's mailing address at any time prior to
the date the  Obligations  are paid in full,  Debtor  agrees  to  promptly  give
written notice of said change of address by registered or certified mail, return
receipt requested, all charges prepaid. (vii) CAPTIONS. The captions contained


                                     Page 6
<PAGE>

herein are  inserted  for  convenience  only and shall not affect the meaning or
interpretation of this Security Agreement or any provision  thereof.  The use of
the plural shall also mean the singular,  and vice versa, (viii) LOAN DOCUMENTS.
The term "Loan  Documents"  refers to all  documents,  whether now or  hereafter
existing,  executed in connection with the Obligations and may include,  without
limitation  and  whether  executed  by  Borrower,  Debtor or others,  commitment
letters,  loan  agreements,  guaranty  agreements,  other  security  agreements,
letters of credit, instruments, financing statements, mortgages, deeds of trust,
deeds  to  secure  debt,  and any  amendments  or  supplements  (excluding  swap
agreements as defined in 11 U.S.C.  ss. 101). (ix) JOINT AND SEVERAL  LIABILITY.
If more than one person has signed this  Security  Agreement,  such  parties are
jointly and  severally  obligated  hereunder.  (x) BINDING  CONTRACT.  Debtor by
execution and Bank by acceptance  of this  Security  Agreement,  agree that each
party is bound by all terms and provisions of this Security Agreement.

IN WITNESS WHEREOF,  Debtor, on the day and year first written above, has caused
this Security Agreement to be executed under seal.

                               Optical Cable Corporation, a Virginia Corporation
                               Taxpayer Identification Number: 54-1237042

CORPORATE                      By: /s/  Robert Kopstein
SEAL                               -------------------------------
                                   Robert Kopstein, President




                                     Page 7
<PAGE>

                               SECURITY AGREEMENT

                                                                  March 13, 1996
Optical Cable Corporation, a Virginia Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(Individually and collectively "Debtor")

First Union National Bank of Virginia
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

To secure payment and performance of the Promissory Note executed by the Debtor
dated March 13, 1996, in the original principal amount of $5,000,000.00, payable
to Bank, and any extension, renewal, modification or novation thereof (the
"Note"), this Security Agreement and the other Loan Documents, and any other
obligation of Debtor to Bank however created, arising or evidenced, whether
direct or indirect, absolute or contingent, now existing or hereafter arising or
acquired, including swap agreements (as defined in 11 U.S.C. ss.101), future
advances, and all costs and expenses incurred by Bank to obtain, preserve,
perfect and enforce the security interest granted herein and to maintain,
preserve and collect the property subject to the security interest
(collectively, "Obligations").

Debtor hereby grants to Bank a continuing security interest in and lien upon the
following described property and any additions, accessions, or substitutions
thereof and thereto, and all proceeds and products thereof, including cash or
non-cash dividends (collectively, "Collateral"):

All accounts, contract rights, inventory, furniture, fixtures, machinery,
equipment, and general intangibles, now existing or hereafter arising and
proceeds and products thereof.

All books, records, files, computer programs, data processing records, computer
software, documents and other information, property, or general intangibles, at
any time evidencing, describing or pertaining to, and all containers and
packages for, the property described above.

All products and proceeds of any of the property described above in any form,
and all proceeds of such products including, without limitation, all cash and
credit balances, rents, revenues and profits from sale, lease or license of any
Collateral, all payments under any indemnity, warranty or guaranty with respect
to any of such property, all proceeds of fire or other insurance, including any
refunds or unearned premiums in connection with any cancellation, adjustment, or
termination of any Insurance policy, all proceeds obtained as a result of any
legal action or proceeding with respect to any of such property, and claims by
Debtor against third parties for loss or damage to, or destruction of, any of
such property.

Debtor hereby represents and agrees that:

                                        1
<PAGE>

OWNERSHIP. Debtor owns the Collateral or Debtor will purchase and acquire rights
in the Collateral within ten days of the date advances are made under the Note.
The Collateral is free and clear of all liens, security interests, and claims
except those previously reported in writing to Bank. Debtor will keep the
Collateral free and clear from all liens, security interests and claims, other
than those granted to Bank.

NAME AND OFFICES. There has been no change in the name of the Debtor, or the
name under which the Debtor conducts business, within the five years preceding
the date of execution of this Security Agreement and Debtor has not moved its
executive offices or residence within the five years preceding the date of
execution of this Security Agreement except as previously reported in writing to
Bank. The taxpayer identification number of Debtor as provided herein is
correct.

TITLE/TAXES. Debtor has good and marketable title to Collateral and will warrant
and defend same against all claims. Debtor will not transfer, sell, or lease
Collateral (except in the ordinary course of business). Debtor agrees to pay
promptly all taxes and assessments upon or for the use of Collateral and on this
Security Agreement. At its option, Bank may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on Collateral.
Debtor agrees to reimburse Bank, on demand, for any such payment made by Bank.
Any amounts so paid shall be added to the Obligations.

WAIVERS. Debtor waives presentment, demand, protect, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity. Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a personal property or services
relating to any part of the Collateral. Debtor waives all exemptions and
homestead rights with regard to the Collateral. Debtor waives any and all rights
to notice or to hearing prior to Bank's taking Immediate possession or control
of any Collateral, and to any bond or security which might be required by
applicable law prior to the exercise of any of Bank's remedies against any
Collateral.

EXTENSIONS, RELEASES. Debtor agrees that Bank may extend, renew or modify any of
the Obligations and grant any releases, compromises or indulgences with respect
to any security for the Obligations, or with respect to any party liable for the
Obligations, all without notice to or consent of Debtor and without affecting
the liability of the Debtor of the enforceability of this Security Agreement.

NOTIFICATIONS OF CHANGE. Debtor will notify Bank in writing at least thirty (30)
days prior to any change in: (i) Debtor's chief place of business and/or
residence; (ii) Debtor's name or identity; or (iii) Debtor's corporate
structure. Debtor will keep Collateral at the location(s) previously provided to
Bank until such time as Bank provides written advance consent to a change of
location. Debtor will bear the cost of preparing and filing any documents
necessary to protect Bank's liens.

COLLATERAL CONDITION AND LAWFUL USE. Debtor represents that Collateral is in
good repair and condition and that Debtor shall use reasonable care to prevent
Collateral from being damaged or depreciating. Debtor shall immediately notify
Bank of any material loss or damage to Collateral. Debtor shall not permit any
item of equipment to become a fixture to real estate or an accession to other


                                        2
<PAGE>

personal  property.  Debtor  represents it is in compliance in all respects with
all  federal,  state and local laws,  rules and  regulations  applicable  to its
properties,  Collateral,  operations, business, and finances, including, without
limitation,  any federal or state laws  relating to liquor  (including 18 U.S.C.
ss.3617,  et seq.) or narcotics  (including 21 U.S.C.  ss. 801, et seq.) and all
applicable  federal,  state and local laws, and regulations  intended to protect
the environment.

RISK OF LOSS AND INSURANCE. The Debtor shall bear all risk of loss with respect
to the Collateral. The injury to or loss of Collateral, either partial or total,
shall not release Debtor from payment or other performance hereof. Debtor agrees
to obtain and keep in force casualty and hazard insurance on Collateral. Such
insurance is to be in form and amounts satisfactory to Bank. All such policies
shall provide to Bank a minimum of thirty (30) days written notice of
cancellation; and all policies shall be payable to Bank. Debtor shall furnish to
Bank such policies, or other evidence of such policies satisfactory to Bank.
Bank is authorized, but not obligated, to purchase any or all insurance or
"Single interest insurance" protecting such interest as Bank deems appropriate
against such risks and for such coverage and for such amounts, including either
the loan amount or value of the Collateral at its discretion, all at Debtor's
expense. In such event, Debtor agrees to reimburse Bank for the cost of such
insurance and Bank may add such cost to the Obligations. Debtor shall bear the
risk of loss to the extent of any deficiency in the effective insurance coverage
with respect to loss or damage to any of the Collateral. Debtor hereby assigns
to Bank the proceeds of all such insurance and directs any insurer to make
payments directly to Bank. Debtor hereby appoints Bank its attorney-in-fact,
which appointment shall be irrevocable and coupled with an interest for so long
as the Obligations are unpaid, to file proof of loss and/or any other forms
required to collect from any insurer any amount due from any damage or
destruction of such recovery, to grant releases to insurer, to grant subrogation
rights to any Insurer, and to endorse any settlement check or draft. Debtor
agrees not to exercise any of the foregoing powers granted to Bank without the
Bank's prior written consent.

ADDITIONAL COLLATERAL. If at any time Collateral is unsatisfactory to Bank, then
on demand of Bank, Debtor shall immediately furnish such additional Collateral
satisfactory to Bank to be held by Bank as if originally pledged hereunder and
shall execute such additional security agreements and financing statements as
requested by Bank.

FINANCING STATEMENTS. No Financing Statement senior to the Bank's interest
(other than any filed by Bank) covering any of Collateral or proceeds thereof is
on file in any public filing office. This Security Agreement or a copy thereof,
or any Financing Statement executed hereunder may be recorded. On request of
Bank, Debtor will execute one or more Financing Statements in form satisfactory
to Bank and will pay all costs and expenses of filing the same or of filing this
Security Agreement in all public filing offices, where filing is deemed by Bank
to be desirable. Bank is authorized to file Financing Statements relating to
Collateral without Debtor's signature where necessary to accomplish perfection
of Bank's security interest. The appointment is coupled with an interest and


                                        3
<PAGE>

shall be irrevocable as long as any Obligations remain outstanding. Debtor
further agrees to take such other actions as might be requested for the
perfection, continuation and assignment, in whole or in part, of the security
interests granted herein.

LANDLORD/MORTGAGEE WAIVERS. Debtor shall cause each mortgagee of real property
owned by Debtor and each landlord of real property leased by Debtor to execute
and deliver instruments satisfactory in form and substance to Bank by which such
mortgagee or landlord waives its rights, if any, in the Collateral.

STOCK, DIVIDENDS. If, with respect to any security pledged hereunder, a stock
dividend is declared, any stock split made or right to subscribe is issued, all
the certificates for the shares representing such stock dividend, stock split or
right to subscribe will be immediately delivered, duly endorsed, to the Bank as
additional collateral, and any cash or non-cash dividend will be immediately
delivered to Bank.

CONTRACTS, CHATTEL PAPER, ACCOUNTS, GENERAL INTANGIBLES. Debtor warrants that
the Collateral consisting of contract rights, chattel paper, accounts, or
general intangibles is (a) genuine and enforceable in accordance with its terms
except as limited by law; (b) not subject to any defense, set-off, claim or
counterclaim of a material nature against Debtor except as to which Debtor has
notified Bank in writing; and (c) not subject to any other circumstances that
would impair the validity, enforceability or amount of such Collateral except as
to which Debtor has notified Bank in writing. Debtor shall not amend, modify or
supplement any lease, contract or agreement contained in the Collateral or waive
any provision therein, without prior written consent of Bank.

ACCOUNT INFORMATION. From time to time, at the Bank's request, Debtor shall
provide Bank with schedules describing all accounts and contracts, including
customers' addresses, credited or acquired by Debtor and at the Bank's request
shall execute and deliver written assignments of contracts and other documents
evidencing such accounts and contracts to Bank. Together with each schedule,
Debtor shall, if requested by Bank, furnish Bank with copies of Debtor's sales
journals, invoices, customer purchase orders or the equivalent, and original
shipping or delivery receipts for all goods sold, and Debtor warrants the
genuineness thereof.

ACCOUNT AND CONTRACT DEBTORS. Bank shall have the right to notify the account
and contract debtors obligated on any or all of the Collateral to make payment
thereof directly to Bank and Bank may take control of all proceeds of any such
Collateral, which rights Bank may exercise at any time. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne solely by Debtor whether the same is incurred by Bank or Debtor. Upon
demand of Bank, Debtor will, upon receipt of all checks, drafts, cash and other
remittances in payment on Collateral, deposit the same in a special bank account
maintained with Bank, over which Bank also has the power of withdrawal.

If a Default occurs, no discount, credit, or allowance shall be granted by
Debtor to any account or contract debtor and no return of merchandise shall be
accepted by Debtor without Bank's consent. Bank may, after Default, settle or
adjust disputes and claims directly with account contract debtors for amounts
and upon terms that Bank considers advisable, and in such cases, Bank will
credit the Obligations with the net amounts received by Bank, after deducting


                                        4
<PAGE>

all of the expenses incurred by Bank. Debtor agrees to indemnify and defend Bank
and hold it harmless with respect to any claim or proceeding arising out of any
matter related to collection of the Collateral.

GOVERNMENT CONTRACTS. If any accounts receivable or proceeds of inventory
covered hereby arises from obligations due to the Debtor from any governmental
unit or organization, Debtor shall immediately notify Bank in writing and
execute all documents and take all actions demanded by Bank to ensure
recognition by such governmental unit or organization of the rights of Bank in
the Collateral.

FARM PRODUCTS. Debtor agrees to deliver to Bank a written list identifying all
points of delivery of, and identifying all potential buyers, commission
merchants, and selling agents to or through whom Debtor may sell farm products
secured by this Security Agreement.

LIVESTOCK. If the Collateral includes livestock, Debtor grants to Bank a
security interest in all increase, progeny and products thereof, all feed owned
by Debtor, all water privileges. all equipment used in feeding and handling said
livestock, and all rights, title and interest in and to all contracts and leases
covering lands for pasture and grazing purposes.

INVENTORY. So long as no Default has occurred, Debtor shall have the right in
the regular course of business, to process and sell Debtor's inventory, unless
Bank shall hereafter otherwise direct in writing. Upon demand of Bank, Debtor
will, upon receipt of all checks, drafts, cash and other remittances, in payment
of Collateral sold, deposit the same in a special bank account maintained with
Bank, over which Bank also has the power of withdrawal.

INSTRUMENTS, CHATTEL PAPER. Any Collateral that is instruments, chattel paper
and negotiable documents will be properly assigned to, deposited with and held
by Bank, unless Bank shall hereafter otherwise direct or consent in writing.
Bank may, without notice, before or after maturity of the Obligations, exercise
any or all rights of collection, conversion, or exchange and other similar
rights, privileges and options pertaining to the Collateral, but shall have no
duty to do so.

COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral pledged except as set forth herein; and by way or
explanation and not by way of limitation, Bank shall incur no liability for any
of the following: (i) loss or depreciation f the Collateral (unless caused by
its willful misconduct), (ii) its failure to present any paper for payment or
protest, to protest or give notice of nonpayment, or any other notice with
respect to any paper or Collateral, or (iii) its failure to present or surrender
for redemption, conversion or exchange any bond, stock, paper or other security
whether in connection with any merger, consolidation, recapitalization, or
reorganization, arising out of the refunding of the original security, or for
any other reason, or its failure to notify any party hereto that the Collateral
should be so presented or surrendered.

TRANSFER OF COLLATERAL. The Bank may assign its rights in the Collateral or any
part thereof, to the assignee, as well as any subsequent holder hereof, who
shall thereupon become vested with all the powers and rights herein given to the
Bank with respect to the property so transferred and delivered, and the Bank


                                        5
<PAGE>

shall thereafter be forever relieved and fully discharged from any liability
with respect to such property so transferred, but with respect to any property
not so transferred the Bank shall retain all rights and powers hereby given.

SUBSTITUTE COLLATERAL. With prior written consent of Bank, other Collateral may
be substituted for the original Collateral herein in which event all rights,
duties, obligations, remedies and security interests provided for, created or
granted shall apply fully to such substitute Collateral.

INSPECTION, BOOKS AND RECORDS. Debtor will at all times keep accurate and
complete records covering each item of Collateral, including the proceeds
therefrom/ Ban, or any of its agents, shall have their right, at intervals to be
determined by Bank and without hindrance or delay, to inspect, audit, and
examine the Collateral and to make extracts from the books, records, journals,
orders, receipts, correspondence and other data relating to the Collateral,
Debtor's business or any other transaction between the parties hereto. Debtor
will at its expense furnish Bank copies thereof upon request.

CROSS COLLATERALIZATION LIMITATION. As to any other existing or future consumer
purpose loan by Bank to Debtor, within the meaning of the Federal Consumer
Credit Protection Act, Bank expressly waives any security interest granted
herein in Collateral that Debtor uses as a principal dwelling and household
goods.

ATTORNEYS' FEES AND OTHER COSTS OF COLLECTION. Debtor shall pay all of Bank's
reasonable expenses incurred in enforcing this Agreement and in preserving and
liquidating the Collateral including but not limited to, reasonable arbitration,
attorneys' and experts' fees and expenses, whether incurred without the
commencement of a suit or proceeding.

DEFAULT. A default ("Default") under this Security Agreement occurs upon: (a)
The failure of timely payment or performance of any of the Obligations or a
default under any Loan Document; (b) Any breach of any representation or
agreement contained or referred to in this Security Agreement or other Loan
Document; and/or (c) Any loss, theft, substantial damage, or destruction of the
Collateral not fully covered by insurance, or as to which insurance proceeds are
not permitted to Bank within thirty (30) days of the loss; any sale (except the
sale of inventory in the ordinary course of business), lease, or encumbrance of
any of the Collateral without prior written consent of Bank; or the making of
any levy, seizure, or attachment on or of the Collateral which is not removed
with ten (10) days.

REMEDIES ON DEFAULT (INCLUDING POWER OF SALE). If a Default occurs, all of the
Obligations shall be immediately due and payable, without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code. Without limitation thereto, Bank shall have the following rights and
remedies: (a) To take immediate possession of the Collateral, without notice or
resort to legal process, and for such purpose, to enter upon any premises on
which the collateral or any part thereof may be situated and to remove the same
therefrom, or, at its option, to render the Collateral unusable or dispose of
said Collateral on Debtor's premises, (b) To require Debtor to assemble the
Collateral and make it available to Bank at a place to be designated by Bank,
(c) To exercise its right of set-off or security interest as to any monies of
Debtor deposited with Bank or affiliates of Bank, without notice, (d) To dispose
of Collateral, as a unit or in parcels, separately or with any real property
interests also securing the Obligations, in any county or place to be selected
by Bank, at either private or public sale (at which public sale bank may be the
purchaser) with or without having the Collateral physically present at said
sale. If the Collateral includes motor vehicles or household appliances, it is
agreed that disposition by private sale is commercially reasonable, but private


                                        6
<PAGE>

sale shall not be deemed to be Bank's exclusive remedy, it being understood that
Bank may elect to dispose of the Collateral in any other commercially reasonable
manner, (e) Any notice of sale, disposition or other action by Bank required by
law and sent to Debtor at Debtor's address shown above, or at such other address
of Debtor as may from time to time be shown on the records of Bank, at least
five (5) days prior to such action, shall constitute reasonable notice to
Debtor. Notice shall be deemed given or sent when mailed postage prepaid to
Debtor's address as provided herein, (f) Bank shall be entitled to apply the
proceeds of any sale or other disposition of the Collateral, and the payments
received by Bank with respect to any of the Collateral, to the Obligations in
such order and manner as Bank may determine, (g) Collateral that is subject to
rapid declines in value and is customarily sold in recognized markets may be
disposed of by Bank in a recognized market for such collateral without providing
notice of sale.

REMEDIES ARE CUMULATIVE. No failure on the part of Bank to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Bank or any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law, in equity, or
in other Loan Documents.

MISCELLANEOUS. (a) Amendments and Waivers. No waivers, amendments or
modifications of any provision of this Security Agreement shall be valid unless
in writing and signed by an officer of Bank. No waiver by Bank of any Default
shall operate as a waiver of any other Default or of the same Default on a
future occasion. Neither the failure of, nor any delay by, Bank in exercising
any right, power or privilege granted pursuant to this Security Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any other right, power or privilege.
(b) Assignment. All rights of Bank hereunder are freely assignable, in whole or
in part, and shall inure to the benefit of and be enforceable by Bank, its
successors, assigns and affiliates. Debtor shall not assign its rights and
interest hereunder without the prior written consent of Bank, and any attempt by
Debtor to assign without Bank's prior written consent is null and void. Any
assignment shall not release Debtor from the Obligations. This Security
Agreement shall be binding upon the Debtor, and the heirs, personal
representatives, successors, and assigns of Debtor. (c) Applicable Law; Conflict
Between Documents. This Security Agreement shall be governed by and construed
under the law of the state in which the office of Bank as stated above is
located without regard to that state's conflict of laws principles. If any terms
of this Security Agreement conflict with the terms of any commitment letter or
loan proposal, the terms of this Security Agreement shall control. (d)
Jurisdiction. Debtor irrevocably agrees to non-exclusive personal jurisdiction i
the state in which the office of Bank as stated above is located. (e)
Severability. If any provision of this Security Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Security Agreement. (f)
Notices. Any notices to Debtor shall be sufficiently given, if in writing and
mailed or delivered to the address of Debtor shown above or such other address
as provided hereunder; and to Bank, if in writing and mailed or delivered to
Bank's office address shown above or such other address as Bank may specify in
writing from time to time. In the event that the Debtor changes Debtor's address
at any time prior to the date this Note is paid in full, Debtor agrees to


                                        7
<PAGE>

promptly  give  written  notice  of said  change of  address  by  registered  or
certified mail, return receipt requested, all charges prepaid. (g) Captions. The
captions contained herein are inserted for convenience only and shall not affect
the  meaning or  interpretation  of this  Security  Agreement  or any  provision
hereof. The use of the plural shall also mean the singular,  and vice versa. (h)
Loan Documents.  The term "Loan Documents"  refers to all documents  executed in
connection with the Obligations and may include, without limitation,  commitment
letters,  loan  agreements,  guaranty  agreements,  other  security  agreements,
letters of credit, instruments, financing statements, mortgages, deeds of trust,
deeds  to  secure  debt,  and any  amendments  or  supplements  (excluding  swap
agreements as defined in 11 U.S.C. ss. 101). (i) Joint and Several Liability. If
more than one  person has signed  this  Security  Agreement,  such  parties  are
jointly and  severally  obligated  hereunder.  (j) Binding  Contract.  Debtor by
execution and Bank by acceptance  of this  Security  Agreement,  agree that each
party is bound by all terms and provisions of this Security Agreement.

ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Security Agreement and other
Loan Documents ("Disputes") between or among parties to this Security Agreement
shall be resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from Loan Documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Security Agreement.

Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in the city in which the office of Bank first stated above is
located. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgement upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements.

Preservation and Limitation of Remedies. Notwithstanding the preceding binding
arbitration provisions, Bank and Debtor agree to preserve, without diminution,
certain remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or after an
arbitration action is brought. Bank and Debtor shall have the right to proceed


                                        8
<PAGE>

in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale granted
under Loan Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation or real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.

Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.

Debtor and Bank agree that they shall not have a remedy of punitive or exemplary
damages against the other in any Dispute and hereby waive any right or claim to
punitive or exemplary damages they have now or which may arise in the future in
connection with any Dispute whether the Dispute is resolved by arbitration or
judicially.

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

Optical Cable Corporation, a Virginia Corporation


By:      /s/ Robert Kopstein
         -----------------------------------
         Robert Kopstein, President                       CORPORATE
                                                          SEAL


Taxpayer Identification Number:  54-1237042



                                        9

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>dex23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE>

                                                                      Exhibit 23



                             Accountants' Consent


The Board of Directors
Optical Cable Corporation:


We consent to incorporation by reference in Registration Statement No. 33-09433
on Form S-8 of Optical Cable Corporation of our report dated December 14, 2001,
except as to note 13 to the financial statements, which is as of December 27,
2001, relating to the balance sheets of Optical Cable Corporation as of October
31, 2001 and 2000, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
October 31, 2001, which report appears in the October 31, 2001 Annual Report on
Form 10-K of Optical Cable Corporation.


                                 /s/ KPMG LLP


Roanoke, Virginia
January 29, 2002

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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