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EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

        This Employment Agreement made and entered into as of the 7th day of
May, 2004, by and between JAMES RIVER COAL COMPANY, a Virginia corporation (the
"Company"), and PETER T. SOCHA, an individual resident of the Commonwealth of
Virginia (the "Executive"), the terms and conditions of which are as follows:

SECTION 1. TERM OF EMPLOYMENT

        (a)     The Company shall employ Executive as President and Chief
Executive Officer during the term of his employment, subject to the terms and
conditions set forth in this Employment Agreement, and Executive hereby accepts
such employment.

        (b)     Subject to the terms and conditions set forth in this Employment
Agreement, Executive's employment shall be for a three-year term (the "Term")
beginning on May 7, 2004 (the "Effective Date") and ending on May 6, 2007.
Beginning on May 7, 2005 and on each May 7 thereafter, the Term may, by mutual
agreement of Executive and the Company, be extended by an additional one-year
period such that the remaining Term will then be three years. If the Term is not
extended on any May 7 renewal date by mutual agreement of the parties, the Term
shall terminate upon the expiration of the remaining Term .

SECTION 2. POSITION AND DUTIES AND RESPONSIBILITIES

        (a)     POSITION. Executive shall be the President and Chief Executive
Officer of the Company. During the Term, the Company will cause Executive to be
nominated to the Board of Directors of the Company ("Board") and shall recommend
to the shareholders Executive's election to the Board.

        (b)     DUTIES AND RESPONSIBILITIES. Executive's duties and
responsibilities shall be those normally associated with Executive's position as
President and Chief Executive Officer, plus any additional duties and
responsibilities that the Board from time to time may assign orally or in
writing to Executive. Executive shall report to the Board and shall have such
powers as may be delegated to him by such Board. Executive shall undertake to
perform all Executive's duties and responsibilities for the Company in good
faith and on a full-time basis and shall at all times act in the course of
Executive's employment under this Employment Agreement in the best interest of
the Company, provided that Executive may serve on corporate, civic, educational
or charitable boards or committees.

SECTION 3. COMPENSATION AND BENEFITS

        (a)     BASE SALARY. Executive's initial base salary shall be Three
Hundred Seventy-Five Thousand Dollars ($375,000) per year ("Base Salary"), which
Base Salary shall be payable in accordance with the Company's standard payroll
practices and policies for executive officers and shall be subject to such
withholdings as required by law or as otherwise permissible under such practices
or policies. The Base Salary shall be subject to periodic increases (but not
decreases) as determined by the Board.

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        (b)     ANNUAL BONUS AND OTHER INCENTIVE COMPENSATION. During the Term,
Executive shall be eligible to receive an annual bonus based upon achieving
targeted financial objectives, in accordance with the annual bonus plan
established by the Board. Executive shall also be eligible to participate in
such other annual bonus and incentive compensation programs as the Board shall
make available to executive officers.

        (c)     EMPLOYEE BENEFIT PLANS. Executive shall be entitled to
participate in the employee benefit plans, programs and policies (including
health, life, disability, dental and retirement plans) maintained by the Company
that cover executive officers in accordance with the terms and conditions of
such plans, programs and policies as in effect from time to time.

        (d)     STOCK OPTION AND RESTRICTED STOCK GRANTS. Executive will be
granted (i) on May 7, 2004, a Stock Option to purchase 75,000 shares of the
Company's Common Stock at $21.60 per share and vesting 20% per year commencing
one year after the grant date; and (ii) on May 7, 2004, 150,000 shares (103,125
shares Time Vested and 46,875 shares Performance Vested) of Restricted Stock.
Upon a change in control of the Company (as defined in the Company's Equity
Incentive Plan), the Stock Option shall become fully vested and immediately
exercisable and the shares of Restricted Stock shall become fully vested. The
other terms and conditions of the Stock Option and the Restricted Stock shall be
established by the Compensation Committee of the Board consistent with the terms
of the Company's Equity Incentive Plan.

        (e)     VACATION. Executive shall be entitled to two weeks of vacation
during each successive one year period in the Term (or such greater amount as
may be provided under Company policy), which vacation time shall be taken at
such time or times in each such one year period so as not to materially and
adversely interfere with the business of the Company.

        (f)     BUSINESS EXPENSES. Executive shall have the right to be promptly
reimbursed for Executive's reasonable and appropriate business expenses which
Executive incurs in connection with the performance of Executive's duties and
responsibilities under this Employment Agreement in accordance with the
Company's expense reimbursement policies and procedures for its executive
officers.

        (g)     DIRECTORS' AND OFFICERS' INSURANCE. Effective as of the
Effective Date, the Company shall take all reasonable steps to ensure that
Executive has been provided with adequate coverage under a directors' and
officers' liability insurance policy.

        (h)     CONFIRMATION BONUS. On or about the Effective Date, Executive
will be paid a bonus in the amount of Six Hundred Thousand Dollars ($600,000),
subject to withholding of all applicable taxes, relating to the successful
emergence of the Company from bankruptcy.

SECTION 4. TERMINATION OF EMPLOYMENT

        (a)     TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR DISABILITY OR
BY EXECUTIVE FOR GOOD REASON.

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                (1)     The Company shall have the right to terminate
        Executive's employment at any time, and Executive shall have the right
        to resign at any time.

                (2)     If the Company terminates Executive's employment other
        than for Cause, death or Disability or if Executive resigns for Good
        Reason, the Company shall (in lieu of any severance benefits under any
        Company severance program) pay or provide to Executive the following:

                        (i)     Executive will continue to receive his Base
                Salary as then in effect through his Date of Termination and
                shall also receive a lump sum payment equal to the greater of:
                (a) Base Salary for the remaining Term of the Employment
                Agreement, or (b) Base Salary for twelve (12) months, to be paid
                not later than 10 days after Executive's Date of Termination.
                The lump sum payment under this subsection (i) shall not alter
                the amounts Executive is entitled to receive under the benefit
                plans described in subsection (iii) below. Benefits under such
                plans shall be determined as if Executive had continued to
                receive his Base Salary over the applicable severance period.

                        (ii)    Executive shall be entitled to a prorata bonus
                payment from the Company for the year of termination equal to
                Executive's bonus for such year (assuming Executive earned a
                bonus at the Target Award level) multiplied by a fraction, the
                numerator of which is the number of days Executive was employed
                during the year and the denominator of which is 365.

                        (iii)   The group health care (including any executive
                medical plan) and group term life insurance benefits coverages
                provided to Executive at his Date of Termination shall be
                continued at the same level as for active executives and in the
                same manner as if his employment under this Agreement had not
                terminated, beginning on the Date of Termination and continuing
                for the greater of the period in subsection (i)(a) or (i)(b)
                above. Any additional coverages Executive had at termination,
                including dependent coverage, will also be continued for such
                period on the same terms, to the extent permitted by the
                applicable policies or contracts. Any costs Executive was paying
                for such coverages at the time of termination shall be paid by
                Executive by separate check payable to the Company each month in
                advance. If the terms of any benefit plan referred to in this
                subsection (iii), or the laws applicable to such plan do not
                permit continued participation by Executive, then the Company
                will arrange for other coverage(s) satisfactory to Executive at
                the Company's expense which provides substantially similar
                benefits or, at Executive's election, will pay Executive a lump
                sum amount equal to the costs of such coverage(s) for the
                applicable severance period.

                        For purposes of any individual executive life insurance
                policy (or policies) maintained by the Company for Executive,
                the Company shall

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                continue to pay the premiums for such policy or policies during
                such severance period.

                        (iv)    Executive will become fully vested in any
                amounts credited under a deferred compensation plan in which
                Executive participates and Executive's benefits under such plan
                will be paid within ten (10) days of his Date of Termination.
                Executive will be entitled to receive his accrued vacation pay.

                        (v)     Except as expressly provided herein, all other
                fringe benefits provided to Executive as an active employee of
                the Company (e.g., long-term disability, AD&D, etc.), shall
                cease on his Date of Termination (except to the extent Executive
                has already qualified for benefits under any such program),
                provided that any conversion or extension rights applicable to
                such benefits shall be made available to Executive at his Date
                of Termination or when such coverages otherwise cease.

                (3)     If the Company terminates Executive's employment other
        than for Cause, death or Disability or if Executive resigns for Good
        Reason, Executive shall become immediately fully vested in (i) all
        Restricted Stock previously granted to Executive, (ii) all Stock Options
        previously granted to Executive, in which event all such Stock Options
        shall become immediately fully exercisable by Executive and shall remain
        exercisable for 12 months after Executive's date of termination or such
        longer exercise period as specified in such options, and (iii) any other
        equity awards received by Executive.

        (b)     TERMINATION BY THE COMPANY FOR CAUSE OF BY EXECUTIVE OTHER THAN
FOR GOOD REASON.

                (1)     The Company shall have the right to terminate
        Executive's employment at any time for Cause, and Executive shall have
        the right to resign at any time other than for Good Reason.

                (2)     If the Company terminates Executive's employment for
        Cause or Executive resigns other than for Good Reason, the Company's
        only obligation to Executive under this Employment Agreement shall be to
        pay Executive's earned but unpaid Base Salary then in effect under
        Section 3(a), if any, up to Executive's Date of Termination and unpaid
        accrued vacation pay.

        (c)     CAUSE. The term "Cause as used in this Employment Agreement
shall mean a termination of Executive for any of the following reasons:

                (1)     Executive's willful and continued breach of his duties
        after written demand for performance has been made (other than any such
        failure resulting from incapacity due to physical or mental illness, and
        specifically excluding any failure by Executive, after reasonable
        efforts, to meet performance expectations),


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                (2)     Executive's willfully engaging in illegal conduct or
        gross misconduct that is demonstrably injurious to the Company, or

                (3)     Executive's conviction of a felony or other crime
        involving moral turpitude.

        With respect to clauses (1) and (2) above, Executive shall not be deemed
to have been involuntarily terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board (after reasonable notice to Executive and an
opportunity for him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, Executive was guilty of
conduct set forth above in clauses (1) or (2) and specifying the particulars
thereof in detail. For purposes of this Agreement, no act or failure to act by
Executive shall be deemed to be "willful" unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interests of the Company.

        (d)     GOOD REASON. The term "Good Reason" means the occurrence
(without Executive's express written consent) of any one of the following acts
by the Company, or failures by the Company to act, unless, in the case of any
act or failure to act described below, such act or failure to act is corrected
prior to the Date of Termination specified in the notice of termination given in
respect thereof:

                (1)     a material reduction in Executive's position, authority,
        duties or responsibilities,

                (2)     a reduction in Executive's Base Salary or target bonus,

                (3)     the failure by the Company to maintain a benefit program
        (or to provide a substitute benefit program) that is material to
        Executive's overall compensation,

                (4)     the relocation of Executive's office or the Company's
        headquarters from the Eastern Virginia area,

                (5)     the failure to require a successor to honor this
        Agreement, or

                (6)     the Company's material breach of any other provision of
        this Agreement.

        Executive's right to terminate the Executive's employment for Good
        Reason shall not be affected by the Executive's incapacity due to
        physical or mental illness, except for a Disability as defined in
        subsection (e) below.

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        (e)     TERMINATION FOR DISABILITY OR DEATH.

                (1)     The Company shall have the right to terminate
        Executive's employment on or after the date Executive incurs a
        Disability, and Executive's employment shall terminate at Executive's
        death.

                (2)     If Executive's employment terminates under this Section
        4(e), the Company's only obligation under this Employment Agreement
        shall be to pay Executive, or, if Executive dies, Executive's estate,
        any earned but unpaid Base Salary then in effect under Section 3(a),
        through Executive's Date of Termination, provided that Executive shall
        have such rights under the Company's benefit plans as are provided in
        such plans.

        The term "Disability" as used in this Employment Agreement shall have
        the meaning ascribed to such term in the Company's long-term disability
        plan covering the Executive, or in the absence of such plan, a meaning
        consistent with Section 22(e)(3) of the Internal Revenue Code of 1986,
        as amended (the "Code"). The existence of a Disability shall be
        determined by the Board in good faith.

        (f)     BENEFITS AT TERMINATION OF EMPLOYMENT. Upon Executive's
termination of employment, Executive shall have the right to receive any
benefits payable under the Company's employee benefit plans, programs and
policies which Executive otherwise has a nonforfeitable right to receive under
the terms of such plans, programs and policies (other than severance benefits)
independent of Executive's rights under this Employment Agreement, without
regard to the reason for such termination of employment.

        (g)     DATE OF TERMINATION. Executive's Date of Termination shall be
the date specified in the notice of termination (which, unless otherwise
required by this Agreement, may be immediate) as the date upon which Executive's
employment with the Company is to cease. In the case of termination by Executive
for Good Reason, the Date of Termination shall not be less than thirty (30) days
nor more than sixty (60) days from the date the notice of termination is given.

SECTION 5. COVENANTS BY EXECUTIVE.

        (a)     THE COMPANY'S PROPERTY.

                (1)     Upon the termination of Executive's employment for any
        reason or, if earlier, upon the Company's request, Executive shall
        promptly return all "Property" which had been entrusted or made
        available to Executive by the Company.

                (2)     The term "Property" means all records, files, memoranda,
        reports, price lists, customer lists, drawings, plans, sketches, keys,
        codes, computer hardware and software and other property of any kind or
        description prepared, used or possessed by Executive during Executive's
        employment by the Company and, if applicable, any of its affiliates (and
        any duplicates of any such property)

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        together with any and all information, ideas, concepts, discoveries, and
        inventions and the like conceived, made, developed or acquired at any
        time by Executive individually or, with others during Executive's
        employment which relate to the Company business, products or services.

        (b)     TRADE SECRETS.

                (1)     Executive agrees that Executive will hold in a fiduciary
        capacity for the benefit of the Company, and any of its affiliates, and
        will not directly or indirectly use or disclose, any "Trade Secret" that
        Executive may have acquired during the term of Executive's employment by
        the Company or any of its affiliates for so long as such information
        remains a Trade Secret.

                (2)     The term "Trade Secret" means information, including,
        but not limited to, technical or nontechnical data, a formula, a
        pattern, a compilation, a program, a device, a method, a technique, a
        drawing, a process, financial data, financial plans, product plans, or a
        list of actual or potential customers or suppliers that (a) derives
        economic value, actual or potential, from not being generally know to,
        and not being generally readily ascertainable by proper means by other
        person who can obtain economic value from its disclosure or use and (b)
        is the subject of reasonable efforts by the Company and any of its
        affiliates to maintain its secrecy.

                (3)     This Section 5(b) and Section 5(c) are intended to
        provide rights to the Company which are in addition to, and not in lieu
        of, those rights the Company has under the common law or applicable
        statutes for the protection of Trade Secrets.

        (c)     CONFIDENTIAL INFORMATION.

                (1)     Executive, while employed under this Employment
        Agreement and thereafter during the "Restricted Period", shall hold in a
        fiduciary capacity for the benefit of the Company and any of its
        affiliates, and shall not directly or indirectly use or disclose, any
        "Confidential Information" that Executive may have acquired (whether or
        not developed or compiled by Executive and whether or not Executive is
        authorized to have access to such information) during the term of, and
        in the course of, or as a result of Executive's employment by the
        Company or any of its affiliates.

                (2)     The term "Confidential Information" means any secret,
        confidential or proprietary information possessed by the Company or any
        of its affiliates relating to their business, including, without
        limitation, trade secrets, customer lists, details of client or
        consultant contracts, current and anticipated customer requirements,
        pricing policies, price lists, market studies, business plans,
        operational methods, marketing plans or strategies, legal advice and
        communications with the Company's counsel, product development
        techniques or flaws, computer software programs (including object code
        and source code), data

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        and documentation data, base technologies, systems, structures and
        architectures, inventions and ideas, past current and planned research
        and development, compilations, devices, methods, techniques, processes,
        financial information and data, business acquisition plans and new
        personal acquisition plans (not otherwise included in the definition of
        a Trade Secret under this Employment Agreement) that has not become
        generally available to the public by the act of one who has the right to
        disclose such information without violating any right of the Company or
        any of its affiliates. Confidential Information may include, but not be
        limited to, future business plans, licensing strategies, advertising
        campaigns, information regarding customers, executives and independent
        contractors and the terms and conditions of this Employment Agreement.

        (d)     RESTRICTED PERIOD. The term "Restricted Period" as used in the
Employment Agreement shall mean the one-year period which starts on the date
Executive's employment terminates with the Company, without regard to whether
such termination comes before or after the end of the Term.

        (e)     NONSOLICITATION OF EMPLOYEES. Executive (i) while employed under
this Employment Agreement shall not, either directly or indirectly, call on,
solicit or attempt to induce any other officer, employee or independent
contractor of the Company or any of its affiliates to terminate his or her
employment with the Company or any of its affiliates and shall not assist any
other person or entity in such a solicitation (regardless of whether any such
officer, employee or independent contractor would commit a breach of contract by
terminating his employment), and (ii) during the Restricted Period, shall not,
either directly or indirectly, call on, solicit or attempt to induce any other
officer, employee or independent contractor of the Company or any of its
affiliates with whom Executive had contact, knowledge of, or association in the
course of Executive's employment with the Company or any of its affiliates as
the case may be, during the twelve month period immediately preceding the
beginning of the Restricted Period, to terminate his employment with the Company
or any of its affiliates and shall not assist any other person or entity in such
a solicitation (regardless of whether any such officer, employee or independent
contractor would commit a breach of contract by terminating his employment).

        (f)     REASONABLE AND CONTINUING OBLIGATIONS. Executive agrees that
Executive's obligations under this section 5 are obligations which will continue
beyond the date Executive's employment terminates and that such obligations are
reasonable and necessary to protect the Company's legitimate business interests.
The Company in addition shall have the right to take such other action as the
Company deems necessary or appropriate to compel compliance with the provisions
of this Section 5.

        (g)     REMEDY FOR BREACH. Executive agrees that the remedies at law of
the Company for any actual or threatened breach by Executive of the covenants in
this Section 5 would be inadequate and that the Company shall be entitled to
seek specific performance of the covenants in this Section 5, including entry of
an ex- parte , temporary restraining order in state or federal court,
preliminary and permanent injunctive relief against activities in violation of
this Section 5, or both, or other

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appropriate judicial remedy, writ or order, in addition to any damages and legal
expenses which the Company may be legally entitled to recover. Executive
acknowledges and agrees that the covenants in this Section 5 shall be construed
as agreements independent of any other provision of this or any other agreement
between the Company and Executive, and that the existence of any claim or cause
of action by Executive against the Company, whether predicated upon this
Employment Agreement or any other agreement, shall not constitute a defense to
the enforcement by the Company of such covenants.

SECTION 6. MISCELLANEOUS

        (a)     NOTICES. Notices and all other communications shall be in
writing and shall be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail. Notices to the
Company shall be sent to: James River Coal Company, 901 East Byrd Street, Suite
1600, Richmond, Virginia 23219. Attention: Corporate Secretary. Notices and
communications to Executive shall be sent to the address Executive most recently
provided to the Company.

        (b)     NO WAIVER. Except for the notice described in Section 6(a), no
failure by either the Company or Executive at any time to give notice of any
breach by the other of, or to require compliance with, any condition or
provision of this Employment Agreement shall be deemed a waiver of any
provisions or conditions of this Employment Agreement.

        (c)     VIRGINIA LAW. This Employment Agreement shall be governed by
Virginia law without reference to the choice of law principles thereof.

        (d)     ASSIGNMENT. This Employment Agreement shall be binding upon and
inure to the benefit of the Company and any successor to all or substantially
all of the business or assets of the Company. The Company may assign this
Employment Agreement to any affiliate or successor, and no such assignment shall
be treated as a termination of Executive's employment under this Employment
Agreement. Executive's rights and obligations under this Employment Agreement
are personal and shall not be assigned or transferred.

        (e)     OTHER AGREEMENTS. This Employment Agreement replaces and merges
any and all previous agreements and understandings regarding all the terms and
conditions of Executive's employment relationship with the Company, and this
Employment Agreement constitutes the entire agreement between the Company and
Executive with respect to such terms and conditions, except for rights under
other agreements referred to in this Agreement.

        (f)     AMENDMENT. No amendment to this Employment Agreement shall be
effective unless it is in writing and signed by the Company and by Executive.

        (g)     INVALIDITY. If any part of this Employment Agreement is held by
a court of competent jurisdiction to be invalid or otherwise unenforceable, the
remaining part shall be unaffected and shall continue in full force and effect,
and the invalid or

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otherwise unenforceable part shall be deemed not to be part of this Employment
Agreement.

        (h)     DISPUTES; LEGAL FEES; INDEMNIFICATION.

                        (i)     DISPUTES - All claims by Executive for
                compensation and benefits under this Agreement shall be in
                writing and shall be directed to and be determined by the Board.
                Any denial by the Board of a claim for benefits under this
                Agreement shall be provided in writing to Executive within 30
                days of such decision and shall set forth the specific reasons
                for the denial and the specific provisions of this Agreement
                relied upon. The Board shall afford a reasonable opportunity to
                Executive for a review of its decision denying a claim and shall
                further allow Executive to appeal in writing to the Board a
                decision of the Board within sixty (60) days after notification
                by the Board that Executive's claim has been denied. To the
                extent permitted by applicable law, any further dispute or
                controversy arising under or in connection with this Agreement
                shall be settled exclusively by arbitration in Richmond,
                Virginia, in accordance with the commercial arbitration rules of
                the American Arbitration Association then in effect. Judgment
                may be entered on the arbitrator's award in any court having
                jurisdiction.

                        (ii)    LEGAL FEES - If Executive terminates his
                employment for Good Reason or if the Company involuntarily
                terminates Executive without Cause, then, in the event Executive
                incurs legal fees and other expenses in seeking to obtain or to
                enforce any rights or benefits provided by this Agreement and is
                successful, in whole or in any significant part, in obtaining or
                enforcing any such rights or benefits through settlement,
                mediation, arbitration or otherwise, the Company shall promptly
                pay Executive's reasonable legal fees and expenses and related
                costs incurred in enforcing this Agreement including, without
                limitation, attorneys fees and expenses, experts fees and
                expenses, investigative fees, and travel expenses. Except to the
                extent provided in the preceding sentence, each party shall pay
                its own legal fees and other expenses associated with any
                dispute under this Agreement.

                        (iii)   INDEMNIFICATION. During the Term of this
                Agreement and after Executive's termination, the Company shall
                indemnify Executive and hold Executive harmless from and against
                any claim, loss or cause of action arising from or out of
                Executive's performance as an officer, director or employee of
                the Company or any of its subsidiaries or other affiliates or in
                any other capacity, including any fiduciary capacity, in which
                Executive serves at the Company's request, in each case to the
                maximum extent permitted by law and under the Company's Articles
                of Incorporation and By-Laws (the "Governing Documents"),
                provided that in no event shall the protection afforded to
                Executive hereunder be less

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                than that afforded under the Governing Documents as in effect on
                the date of this Agreement except for changes mandated by law.

        IN WITNESS WHEREOF, the Company and Executive have executed this
Employment Agreement as of the date first above written to be effective on the
Effective Date.

                                           JAMES RIVER COAL COMPANY


                                           By: /s/ Paul H. Vining
                                               --------------------------------
                                               Name: Paul H. Vining
                                               Title: Chairman of the
                                                      Compensation Committee


                                           EXECUTIVE


                                           /s/ Peter T. Socha
                                           ------------------
                                           PETER T. SOCHA






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