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                                                                    EXHIBIT 4.25



             SEVENTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE

         SEVENTH SUPPLEMENTAL SENIOR SUBORDINATED NOTE INDENTURE (this
"Supplemental Senior Subordinated Note Indenture"), dated as of August 14, 2002,
among BEAVER DAM COAL COMPANY, a Delaware corporation (the "Guaranteeing
Subsidiary"), a subsidiary of Peabody Energy Corporation (formerly P&L Coal
Holdings Corporation) (or its permitted successor), a Delaware corporation (the
"Company"), the Company, the other Senior Subordinated Note Guarantors (as
defined in the Senior Subordinated Note Indenture referred to herein) and State
Street Bank and Trust Company, as Senior Subordinated Note Trustee under the
Senior Subordinated Note Indenture referred to below (the "Senior Subordinated
Note Trustee").

                                   WITNESSETH

         WHEREAS, the Company has heretofore executed and delivered to the
Senior Subordinated Note Trustee a Senior Subordinated Note Indenture (the
"Senior Subordinated Note Indenture"), dated as of May 18, 1998 providing for
the issuance of an aggregate principal amount of up to $650.0 million of 9-5/8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes");

         WHEREAS, the Senior Subordinated Note Indenture provides that under
certain circumstances the Guaranteeing Subsidiary shall execute and deliver to
the Senior Subordinated Note Trustee a supplemental Senior Subordinated Note
Indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Senior Subordinated Notes
and the Senior Subordinated Note Indenture on the terms and conditions set forth
herein (the "Subordinated Subsidiary Guarantee"); and

         WHEREAS, pursuant to Section 9.01 of the Senior Subordinated Note
Indenture, the Senior Subordinated Note Trustee is authorized to execute and
deliver this Supplemental Senior Subordinated Note Indenture.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Senior Subordinated Note Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders of the
Senior Subordinated Notes as follows:

         1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Senior Subordinated Note
Indenture.

         2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as
follows:

            (a)   Along with all Senior Subordinated Note Guarantors named in
                  the Senior Subordinated Note Indenture, to jointly and
                  severally Guarantee to each

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                  Holder of a Senior Subordinated Note authenticated and
                  delivered by the Senior Subordinated Note Trustee and to the
                  Senior Subordinated Note Trustee and its successors and
                  assigns, irrespective of the validity and enforceability of
                  the Senior Subordinated Note Indenture, the Senior
                  Subordinated Notes or the obligations of the Company hereunder
                  or thereunder, that:

                  (i)      the principal of and interest on the Senior
                           Subordinated Notes will be promptly paid in full when
                           due, whether at maturity, by acceleration, redemption
                           or otherwise, and interest on the overdue principal
                           of and interest on the Senior Subordinated Notes, if
                           any, if lawful, and all other obligations of the
                           Company to the Holders or the Senior Subordinated
                           Note Trustee hereunder or thereunder will be promptly
                           paid in full or performed, all in accordance with the
                           terms hereof and thereof; and

                  (ii)     in case of any extension of time of payment or
                           renewal of any Senior Subordinated Notes or any of
                           such other obligations, that same will be promptly
                           paid in full when due or performed in accordance with
                           the terms of the extension or renewal, whether at
                           stated maturity, by acceleration or otherwise.
                           Failing payment when due of any amount so guaranteed
                           or any performance so guaranteed for whatever reason,
                           the Senior Subordinated Note Guarantors shall be
                           jointly and severally obligated to pay the same
                           immediately.

            (b)   Notwithstanding the foregoing, it is agreed and
                  acknowledged that the Subordinated Subsidiary Guarantee
                  hereunder is subordinated to the Senior Debt of such
                  Subordinated Senior Note Guarantor as set forth in Article 10
                  and in Article 11 of the Senior Subordinated Note Indenture.

            (c)   The obligations hereunder shall be unconditional,
                  irrespective of the validity, regularity or enforceability of
                  the Senior Subordinated Notes or the Senior Subordinated Note
                  Indenture, the absence of any action to enforce the same, any
                  waiver or consent by any Holder of the Senior Subordinated
                  Notes with respect to any provisions hereof or thereof, the
                  recovery of any judgment against the Company, any action to
                  enforce the same or any other circumstance which might
                  otherwise constitute a legal or equitable discharge or defense
                  of a Senior Subordinated Note Guarantor.

            (d)   The following is hereby waived: diligence, presentment,
                  demand of payment, filing of claims with a court in the event
                  of insolvency or bankruptcy of the Company, any right to
                  require a proceeding first against the Company, protest,
                  notice and all demands whatsoever.


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         (e)      This Subordinated Subsidiary Guarantee shall not be discharged
                  except by complete performance of the obligations contained in
                  the Senior Subordinated Notes and the Senior Subordinated Note
                  Indenture.

         (f)      If any Holder or the Senior Subordinated Note Trustee is
                  required by any court or otherwise to return to the Company,
                  the Senior Subordinated Note Guarantors, or any custodian,
                  Senior Subordinated Note Trustee, liquidator or other similar
                  official acting in relation to either the Company or the
                  Senior Subordinated Note Guarantors, any amount paid by either
                  to the Senior Subordinated Note Trustee or such Holder, this
                  Subordinated Subsidiary Guarantee, to the extent theretofore
                  discharged, shall be reinstated in full force and effect.

         (g)      The Guaranteeing Subsidiary shall not be entitled to any right
                  of subrogation in relation to the Holders in respect of any
                  obligations guaranteed hereby until payment in full of all
                  obligations guaranteed hereby.

         (h)      As between the Senior Subordinated Note Guarantors, on the one
                  hand, and the Holders and the Senior Subordinated Note
                  Trustee, on the other hand, (x) the maturity of the
                  obligations guaranteed hereby may be accelerated as provided
                  in Article 6 of the Senior Subordinated Note Indenture for the
                  purposes of this Subordinated Subsidiary Guarantee,
                  notwithstanding any stay, injunction or other prohibition
                  preventing such acceleration in respect of the obligations
                  guaranteed hereby, and (y) in the event of any declaration of
                  acceleration of such obligations as provided in Article 6 of
                  the Senior Subordinated Note Indenture, such obligations
                  (whether or not due and payable) shall forthwith become due
                  and payable by the Senior Subordinated Note Guarantors for the
                  purpose of this Subordinated Subsidiary Guarantee.

         (i)      The Senior Subordinated Note Guarantors shall have the right
                  to seek contribution from any non-paying Senior Subordinated
                  Note Guarantor so long as the exercise of such right does not
                  impair the rights of the Holders under the Subordinated
                  Subsidiary Guarantee.

         (j)      Pursuant to Section 11.02 of the Senior Subordinated Note
                  Indenture, after giving effect to any maximum amount and any
                  other contingent and fixed liabilities that are relevant under
                  any applicable Bankruptcy or fraudulent conveyance laws, and
                  after giving effect to any collections from, rights to receive
                  contribution from or payments made by or on behalf of any
                  other Senior Subordinated Note Guarantor in respect of the
                  obligations of such other Senior Subordinated Note Guarantor
                  under Article 11 of the Senior Subordinated Note Indenture
                  shall result in the obligations of such Senior


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                  Subordinated Note Guarantor under its Subordinated Subsidiary
                  Guarantee not constituting a fraudulent transfer or
                  conveyance.

         3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Subordinated Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Subordinated Note a
notation of such Subordinated Subsidiary Guarantee.

         4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

                  (a)      The Guaranteeing Subsidiary may not consolidate with
                           or merge with or into (whether or not such Senior
                           Subordinated Note Guarantor is the surviving Person)
                           another corporation, Person or entity whether or not
                           affiliated with such Senior Subordinated Note
                           Guarantor unless:

                           (i)      subject to Section 11.05 of the Senior
                                    Subordinated Note Indenture, the Person
                                    formed by or surviving any such
                                    consolidation or merger (if other than a
                                    Senior Subordinated Note Guarantor or the
                                    Company) unconditionally assumes all the
                                    obligations of such Senior Subordinated Note
                                    Guarantor, pursuant to a supplemental Senior
                                    Subordinated Note Indenture in form and
                                    substance reasonably satisfactory to the
                                    Senior Subordinated Note Trustee, under the
                                    Senior Subordinated Notes, the Senior
                                    Subordinated Note Indenture and the
                                    Subordinated Subsidiary Guarantee on the
                                    terms set forth herein or therein; and

                           (ii)     immediately after giving effect to such
                                    transaction, no Default or Event of Default
                                    exists.

                  (b)      In case of any such consolidation, merger, sale or
                           conveyance and upon the assumption by the successor
                           corporation, by supplemental Senior Subordinated Note
                           Indenture, executed and delivered to the Senior
                           Subordinated Note Trustee and satisfactory in form to
                           the Senior Subordinated Note Trustee, of the
                           Subordinated Subsidiary Guarantee endorsed upon the
                           Senior Subordinated Notes and the due and punctual
                           performance of all of the covenants and conditions of
                           the Senior Subordinated Note Indenture to be
                           performed by the Senior Subordinated Note Guarantor,
                           such successor corporation shall succeed to and be
                           substituted for the Senior Subordinated Note
                           Guarantor with the same effect as if it had been
                           named herein as a Senior Subordinated Note Guarantor.
                           Such successor corporation thereupon may cause to be
                           signed any or all of the Subordinated Subsidiary
                           Guarantees to be endorsed upon all of the Senior
                           Subordinated Notes issuable hereunder which
                           theretofore shall not have been signed by the Company
                           and delivered to the Senior Subordinated Note
                           Trustee. All the Subordinated Subsidiary Guarantees



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                           so issued shall in all respects have the same legal
                           rank and benefit under the Senior Subordinated Note
                           Indenture as the Subordinated Subsidiary Guarantees
                           theretofore and thereafter issued in accordance with
                           the terms of the Senior Subordinated Note Indenture
                           as though all of such Subordinated Subsidiary
                           Guarantees had been issued at the date of the
                           execution hereof.

                  (c)      Except as set forth in Articles 4 and 5 of the Senior
                           Subordinated Note Indenture, and notwithstanding
                           clauses (a) and (b) above, nothing contained in the
                           Senior Subordinated Note Indenture or in any of the
                           Senior Subordinated Notes shall prevent any
                           consolidation or merger of a Senior Subordinated Note
                           Guarantor with or into the Company or another Senior
                           Subordinated Note Guarantor, or shall prevent any
                           sale or conveyance of the property of a Senior
                           Subordinated Note Guarantor as an entirety or
                           substantially as an entirety to the Company or
                           another Senior Subordinated Note Guarantor.

         5. RELEASES.

                  (a)      In the event of a sale or other disposition of all of
                           the assets of any Senior Subordinated Note Guarantor,
                           by way of merger, consolidation or otherwise, or a
                           sale or other disposition of all to the capital stock
                           of any Senior Subordinated Note Guarantor, then such
                           Senior Subordinated Note Guarantor (in the event of a
                           sale or other disposition, by way of merger,
                           consolidation or otherwise, of all of the capital
                           stock of such Senior Subordinated Note Guarantor) or
                           the corporation acquiring the property (in the event
                           of a sale or other disposition of all or
                           substantially all of the assets of such Senior
                           Subordinated Note Guarantor) will be released and
                           relieved of any obligations under its Subordinated
                           Subsidiary Guarantee; provided that the Net Proceeds
                           of such sale or other disposition are applied in
                           accordance with the applicable provisions of the
                           Senior Subordinated Note Indenture, including without
                           limitation Section 4.10 of the Senior Subordinated
                           Note Indenture. Upon delivery by the Company to the
                           Senior Subordinated Note Trustee of an Officer's
                           Certificate and an Opinion of Counsel to the effect
                           that such sale or other disposition was made by the
                           Company in accordance with the provisions of the
                           Senior Subordinated Note Indenture, including without
                           limitation Section 4.10 of the Senior Subordinated
                           Note Indenture, the Senior Subordinated Note Trustee
                           shall execute any documents reasonably required in
                           order to evidence the release of any Senior
                           Subordinated Note Guarantor from its obligations
                           under its Subordinated Subsidiary Guarantee.

                  (b)      Any Senior Subordinated Note Guarantor not released
                           from its obligations under its Subordinated
                           Subsidiary Guarantee shall remain liable for the full
                           amount of principal of and interest on the Senior
                           Subordinated Notes



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                           and for the other obligations of any Senior
                           Subordinated Note Guarantor under the Senior
                           Subordinated Note Indenture as provided in Article 11
                           of the Senior Subordinated Note Indenture.

         6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Senior Subordinated Notes, any
Subordinated Subsidiary Guarantees, the Senior Subordinated Note Indenture or
this Supplemental Senior Subordinated Note Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
of the Senior Subordinated Notes by accepting a Senior Subordinated Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Subordinated Notes. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.

         7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL SENIOR SUBORDINATED NOTE
INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

         8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Senior Subordinated Note Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.

         9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

         10. THE SENIOR SUBORDINATED NOTE TRUSTEE. The Senior Subordinated Note
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Supplemental Senior Subordinated Note
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Senior Subordinated Note Indenture to be duly executed and attested, all as of
the date first above written.

                                    BEAVER DAM COAL COMPANY


                                    /s/ STEVEN F. SCHAAB
                                   --------------------------------------------
                                   Name:  S. F. Schaab
                                   Title:  Vice President


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