Document:

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                                                                    EXHIBIT 10.7

                        CLOSING CONTRIBUTION, CONVEYANCE
                            AND ASSUMPTION AGREEMENT

         This Closing Contribution, Conveyance and Assumption Agreement (this
"Agreement") dated effective as of 12:01 a.m. Eastern Standard Time on October
 ---------
____, 2001 (the "Effective Time"), is entered into by and among PENN VIRGINIA
                 --------------
OPERATING CO., LLC, a Delaware limited liability company ("PVOC"), PENN VIRGINIA
                                                           ----
CORPORATION, a Virginia corporation ("Penn Virginia"), PENN VIRGINIA RESOURCE
                                      -------------
PARTNERS, L.P., a Delaware limited partnership (the "MLP"), PENN VIRGINIA
                                                     ---
RESOURCE GP, LLC, a Delaware limited liability company ("GP LLC"), PENN VIRGINIA
                                                         ------
RESOURCE LP CORP., a Delaware corporation ("LP Corp."), WISE LLC, a Delaware
                                            --------
limited liability company ("Wise LLC"), LOADOUT LLC, a Delaware limited
                            --------
liability company ("Loadout LLC"), PVR CONCORD LLC, a Delaware limited liability
                    -----------
company ("Concord LLC") PVR LEXINGTON LLC, a Delaware limited liability company
          -----------
("Lexington LLC") PVR SAVANNAH LLC, a Delaware limited liability company
  -------------
("Savannah LLC"), KANAWHA RAIL CORP., a Virginia corporation ("KRC").
  ------------                                                 ---
                                    RECITALS
                                    --------

     WHEREAS, the MLP has been formed pursuant to the Delaware Revised Uniform
Limited Partnership Act for the purpose of, among other things, serving as the
managing member of PVOC, engaging in any business activity permitted to be
engaged by PVOC pursuant to the Amended and Restated Limited Liability Company
Agreement of PVOC and engaging in any business activity approved by GP LLC, the
general partner of the MLP;

     WHEREAS, the following actions have previously been taken prior to the date
hereof:

     1. Penn Virginia Holding Corp, a Delaware corporation ("Holding"), formed
                                                             -------
GP LLC, and contributed $1,000 in capital to it as a capital contribution in
exchange for all of the membership interests in GP LLC.

     2. GP LLC and Holding have formed the MLP, with GP LLC contributing $20 in
exchange for a 2% general partner interest and Holding contributing $980 in
exchange for a 98% limited partner interest.

     3. Holding has formed Penn Virginia Resource Holdings Corp., a Delaware
corporation ("Resource Holdings"), and contributed its 100% membership interest
              -----------------
in GP LLC and its 98% limited partner interest in the MLP to it as a capital
contribution in exchange for all of Resource Holdings' common stock.

     4. Resource Holdings has formed LP Corp. and contributed its 98% limited
partner interest in the MLP to it as a capital contribution in exchange for all
of LP Corp.'s common stock.

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     5. Resource Holdings has formed Penn Virginia Resource GP Corp., a Delaware
corporation ("GP Corp."), and contributed $1,000 to it as a capital contribution
              --------
in exchange for all GP Corp.'s common stock.

     6. Penn Virginia Coal Company, a Virginia corporation ("PVCC"), has formed
                                                             ----
PVOC, and contributed $1,000 to it as a capital contribution in exchange for all
of the membership interests in PVOC.

     7. Wise Environmental Technologies, Inc., a Virginia corporation ("Wise"),
                                                                        ----
has formed Wise LLC, and contributed $1,000 to it as a capital contribution in
exchange for all of the membership interests in Wise LLC.

     8. Paragon Coal Company has formed Loadout LLC, and contributed $1,000 to
it as a capital contribution in exchange for all of the membership interests in
Loadout LLC.

     9. KRC has formed K Rail LLC, and contributed $1,000 to it as a capital
contribution in exchange for all of the membership interests in K Rail LLC.

     10. Holding has contributed all of the common stock of PVCC to Resource
Holdings as a capital contribution.

     11. PVCC has merged into PVOC, Wise has merged into Wise LLC and PCC has
merged into Loadout LLC.

     12. KRC has contributed certain assets to K Rail LLC as a capital
contribution.

     13. PVOC has distributed certain oil and gas interests ("Oil and Gas
                                                              -----------
Interests"), the stock of Powell River and the stock of KRC, to Resource
---------
Holdings.

     14. Resource Holdings has distributed the Oil and Gas Interests to Holding
as a dividend.

     15. Holding has contributed the Oil and Gas Interests to Penn Virginia Oil
& Gas Corporation as a capital contribution.

     16. Resource Holdings has contributed a portion of its membership interest
in PVOC to GP LLC and a portion of its membership interest in PVOC to LP Corp.
as capital contributions.

     17. Resource Holdings has contributed its membership interest in GP LLC to
GP Corp. as a capital contribution.

     18. GP LLC has contributed its membership interest in PVOC to the MLP in
exchange for a continuation of its 2% general partner interest in the MLP.

     19. LP Corp. has contributed its membership interest in PVOC to the MLP in
exchange for a 97.5% limited partner interest in the MLP.

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     20. KRC has contributed its membership interest in K Rail LLC to the MLP in
exchange for a 0.5% limited partner interest in the MLP.

     21. The MLP has contributed its interest in K Rail LLC to PVOC as a capital
contribution.

     22. The MLP has entered into a credit agreement with PNC Bank, National
Association dated [__________] providing for a $70 million credit facility
("Credit Agreement").
  ----------------

     WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, each of the following matters shall occur:

     1.  The MLP will enter into the Amended and Restated Limited Liability
Company Agreement of PVOC.

     2.  The MLP and General Partner will enter into that certain First Amended
and Restated Agreement of Limited Partnership of the MLP ("MLP Agreement").
                                                           -------------

     3.  Each of Loadout LLC, Concord LLC, Lexington LLC, Wise LLC and Savannah
LLC will distribute to PVOC certain accounts receivable due from affiliates.

     4.  PVOC will distribute certain accounts receivable to the MLP and the MLP
will, in turn, distribute those accounts receivable to KRC, GP LLC and LP Corp.,
pro rata to their interests in the MLP.

     5.  Certain intercompany debt of PVOC and its subsidiaries owed to
affiliates of Penn Virginia will be cancelled.

     6.  The limited partner interests in the MLP owned by LP Corp. will be
converted into 7,234,399 subordinated units representing limited partner
interests in the MLP ("Subordinated Units") and 943,617 common limited partner
interests in the MLP ("Common Units"), and the limited partner interests owned
                       ------ -----
by KRC will be converted into 9,244 Common Units and 70,870 Subordinated
Units.

     7.  The MLP will contribute the net proceeds of the public offering of
Common Units of the MLP ("Offering") to PVOC.

     8.  PVOC will repay [$____] million of indebtedness to Penn Virginia and
its affiliates.

     9.  Concord LLC, Lexington LLC and Savannah LLC will merge into PVOC in
accordance with the Delaware Limited Liability Company Act ("Delaware LLC Act").
                                                             ----------------

     NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the parties to this Agreement undertake and agree as
follows:

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                                    Article I
                                   Recordation

     Section 1.1 Recordation of Evidence of Ownership of Assets. In connection
                 ----------------------------------------------
with the mergers under the Delaware LLC Act that are referred to in the recitals
to this Agreement, the parties to this Agreement acknowledge that certain
jurisdictions in which the assets of the applicable parties to such mergers are
located may require that documents be recorded by the entities resulting from
such mergers in order to evidence title in such entities. All such documents
shall evidence such new ownership and are not intended to modify, and shall not
modify, any of the terms, covenants and conditions herein set forth.

                                   Article II
             Distributions of Various Assets, Cancellation of Debt,
             Conversion of Limited Partnership Interests and Mergers

     Section 2.1 Distributions of Loadout LLC, Concord LLC, Lexington LLC, Wise
                 --------------------------------------------------------------
LLC and Savannah LLC to PVOC. Each of Loadout LLC, Concord LLC, Lexington LLC,
----------------------------
Wise LLC and Savannah LLC hereby grant, contribute, transfer, assign and convey
to PVOC, its successors and assigns, all right, title and interest of such
entity in and to the accounts receivable as listed on Exhibit A and PVOC hereby
accepts such assets as a dividend.

     Section 2.2 Distribution of PVOC to the MLP. PVOC hereby grants,
                 -------------------------------
contributes, transfers, assigns and conveys to the MLP, its successors and
assigns, all right, title and interests of PVOC in and to the accounts
receivable as listed on Exhibit B and the MLP hereby accepts such assets as a
dividend.

     Section 2.3 Distribution of MLP to KRC, GP LLC and LP Corp. MLP hereby
                 ----------------------------------------------
grants, contributes, transfers, assigns and conveys to the KRC, GP LLC and LP
Corp., their successors and assigns, pro rata in accordance with their
percentage interests in the MLP as at the date hereof, all right, title and
interests of the MLP to the accounts receivable as listed on Exhibit B and such
entities hereby accept such assets as a dividend.

     Section 2.4 Cancellation of Intercompany Debt. The debt of PVOC and its
                 ---------------------------------
subsidiaries owed to Penn Virginia Corporation and its affiliates as listed on
Exhibit C is hereby cancelled.

     Section 2.5 Mergers of Concord LLC, Lexington LLC and Savannah LLC into
                 -----------------------------------------------------------
PVOC. Concord LLC, Lexington LLC and Savannah LLC merge into PVOC by taking the
----
steps, executing the documents and making the filings necessary to effect such
merger in accordance with the Delaware LLC Act.

     Section 2.6 Conversion of limited partner interests. The limited partner
                 ---------------------------------------
interests in the MLP owned by LP Corp. will be converted into 7,234,399
subordinated units representing limited partner interests in the
MLP ("Subordinated Units") and 943,617 Common Units, and the limited partner
interests owned by KRC will be converted into 9,244 Common Units and 70,870
Subordinated Units in accordance with Section 5.2 of the MLP Agreement.

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     Section 2.7 Credit Agreement Borrowing. The parties acknowledge that the
                 --------------------------
MLP has borrowed [$83] million under the Credit Agreement.

                                  ARTICLE III
                      Public Offering and Use of Proceeds

     Section 3.1 Public Cash Distribution. The parties to this Agreement
                 ------------------------
acknowledge a cash contribution to the MLP of $________ ($________ after payment
of underwriting discounts and commissions) from the Offering in exchange for
[6,352,408] Common Units.

     Section 3.2 MLP Cash Contribution. The MLP hereby contributes cash in the
                 ---------------------
amount of $[net amount received from the Offering less payment of $4.1 million
for fees and expenses in connection with the Offering and related transactions]
to PVOC and PVOC hereby accepts such cash contribution as a contribution to the
capital of PVOC.

     Section 3.3 PVOC Use of Proceeds. The parties to this Agreement acknowledge
                 --------------------
that PVOC has used the cash received as set forth in Section 3.2 above as
follows: (a) repayment of $114.1 million of debt owed to Penn Virginia
Corporation and its affiliates; and (b) for general partnership purposes.

                                  ARTICLE IV
                              Further Assurances

     Section 4.1 Further Assurances. From time to time after the date hereof,
                 ------------------
and without any further consideration, each of Loadout LLC, Concord LLC,
Lexington LLC, Wise LLC, Savannah LLC, MLP and PVOC shall execute, acknowledge
and deliver all such additional deeds, assignments, bills of sale, conveyances,
instruments, notices, releases, acquittances and other documents, and will do
all such other acts and things, all in accordance with applicable law, as may be
necessary or appropriate more fully and effectively to vest in the MLP, PVOC,
KRC, GP LLC or LP Corp. and their successors and assigns, as appropriate,
beneficial and record title to the interests hereby contributed and assigned to
the MLP, PVOC, KRC, GP LLC or LP Corp. or intended so to be and to more fully
and effectively carry out the purposes and intent of this Agreement.

     Section 4.2 Other Assurances. From time to time after the date hereof, and
                 ----------------
without any further consideration, each of the parties to this Agreement shall
execute, acknowledge and deliver all such additional instruments, notices and
other documents, and will do all such other acts and things, all in accordance
with applicable law, as may be necessary or appropriate to more fully and
effectively carry out the purposes and intent of this Agreement.

                                   ARTICLE V
                                 Miscellaneous

     Section 5.1 Order of Completion of Transactions. The transactions provided
                 -----------------------------------
for in Article II of this Agreement shall be completed on the date of this
Agreement, immediately prior to the consummation of the Offering, in the order
set forth in that article.

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     Section 5.2 Headings; References; Interpretation. All article and section
                 ------------------------------------
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including
without limitation, all exhibits attached hereto, and not to any particular
provision of this Agreement. All references herein to articles, sections, and
exhibits shall, unless the context requires a different construction, be deemed
to be references to the articles, sections and exhibits of this Agreement,
respectively, and all such Exhibits attached hereto are hereby incorporated
herein and made a part hereof for all purposes. All personal pronouns used in
this Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders, and the singular shall include the plural and vice
versa. The use herein of the word "including" following any general statement,
term or matter shall not be construed to limit such statement, term or matter to
the specific items or matters set forth immediately following such word or to
similar items or matters, whether or not non-limiting language (such as "without
limitation," "but not limited to," or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of such
general statement, term or matter.

     Section 5.3 Successors and Assigns. The Agreement shall be binding upon and
                 ----------------------
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.

     Section 5.4 No Third Party Rights. The provisions of this Agreement are
                 ---------------------
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.

     Section 5.5 Counterparts. This Agreement may be executed in any number of
                 ------------
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.

     Section 5.6 Governing Law. This Agreement shall be governed by, and
                 -------------
construed in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state without giving
effect to conflict of law principles thereof, except to the extent that it is
mandatory that the law of some other jurisdiction, shall apply.

     Section 5.7 Severability. If any of the provisions of this Agreement are
                 ------------
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.

     Section 5.8 Amendment or Modification. This Agreement may be amended or
                 -------------------------
modified from time to time only by the written agreement of all the parties
hereto.

     Section 5.9 Integration. This Agreement supersedes all previous
                 -----------
understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This

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document is an integrated agreement which contains the entire understanding of
the parties. No understanding, representation, promise or agreement, whether
oral or written, is intended to be or shall be included in or form part of this
Agreement unless it is contained in a written amendment hereto executed by the
parties hereto after the date of this Agreement.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       7
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         IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.

PVOC:                  PENN VIRGINIA OPERATING CO., LLC, a Delaware limited
                       liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

PENN VIRGINIA:         PENN VIRGINIA CORPORATION, a Virginia corporation

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

MLP:                   PENN VIRGINIA RESOURCE PARTNERS, L.P., a Delaware limited
                       partnership
                       By:    Penn Virginia Resource GP, LLC, a Delaware limited
                              liability company, its general partner

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

GP LLC:                PENN VIRGINIA RESOURCE GP, LLC, a Delaware limited
                       liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

                                       8
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LP CORP.:              PENN VIRGINIA RESOURCE LP CORP., a Delaware corporation

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

WISE LLC:              WISE LLC, a Delaware limited liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

LOADOUT LLC:           LOADOUT LLC, a Delaware limited liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

KRC:                   KANAWHA RAIL CORP., a Virginia corporation

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

CONCORD LLC:           PVR CONCORD LLC, a Delaware limited liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

                                       9
<PAGE>

LEXINGTON LLC:         PVR LEXINGTON LLC, a Delaware limited liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

SAVANNAH LLC:          PVR SAVANNAH LLC, a Delaware limited liability company

                       By:
                           -----------------------------------------------------
                       Name:
                             ---------------------------------------------------
                       Title:
                              --------------------------------------------------

                                       10
<PAGE>

                                   Exhibit A
                                   ---------

                                   Exhibit A
             to Contribution, Conveyance and Assumption Agreement
                                      -1-
<PAGE>

                                   Exhibit B
                                   ---------

                                   Exhibit B
             to Contribution, Conveyance and Assumption Agreement
                                      -1-
<PAGE>

                                   Exhibit C
                                   ---------

                                   Exhibit C
             to Contribution, Conveyance and Assumption Agreement
                                      -1-<PAGE>   1

                                  EXHIBIT 10.1

                                 PROMISSORY NOTE

$2,600,000.00                                             Minneapolis, Minnesota
                                                              September 21, 2001

1.       FOR VALUE RECEIVED, Aero Systems Engineering, Inc., a Minnesota
         corporation (the "Borrower"), hereby promises to pay to the order of
         Minnesota ASE, LLC, a Minnesota limited liability company (the
         "Holder"), at such location as the Holder may direct, the principal sum
         of Two Million Six Hundred Thousand and 00/100 Dollars ($2,600,000), in
         lawful money of the United States and immediately available funds,
         together with interest on the unpaid balance accruing as of and from
         the date hereof at a variable interest with an initial rate equal to
         6.250 percent per annum. The interest rate on this Note is subject to
         change from time to time based on changes in an index which is the
         National City Bank Base Rate (the "Index"). The Index currently is
         6.000% per annum. The interest rate to be applied to the unpaid
         principal balance of this Note will be at a rate of 0.250 percentage
         points over the Index, resulting in an initial rate of 6.250% per
         annum.

2.       The entire outstanding principal balance of this Note, together with
         any and all accrued and unpaid interest hereon, shall be due and
         payable January 11, 2002.

3.       The outstanding principal balance of this Note may be prepaid at any
         time at the option of the Borrower, in whole or in part without premium
         or penalty.

4.       All payments and prepayments shall, at the option of the Holder, be
         applied first to any costs of collection, second to accrued interest on
         this Note, and lastly to principal.

5.       Notwithstanding anything to the contrary contained herein, if the rate
         of interest or any other amounts due hereunder are determined by a
         court of competent jurisdiction to be usurious, then said interest rate
         and/or amounts shall be reduced to the maximum amount permissible under
         applicable Minnesota law.

6.       Upon the occurrence at any time of an Event of Default (as defined
         herein) or at any time thereafter, the Borrower promises to pay all
         costs of collection of this Note, including but not limited to
         reasonable attorneys' fees, paid or incurred by the Holder on account
         of such collection, whether or not suit is filed with respect thereto
         and whether such cost or expense is paid or incurred, or to be paid or
         incurred, prior to or after the entry of judgment.

7.       As used herein, the term "Event of Default" shall mean the occurrence
         of any one or more of the following:

<PAGE>   2

         a.       The Borrower shall fail to pay, when due, any amounts required
                  to be paid by the Borrower under this Note; or

         b.       The Borrower shall file or have filed against him a petition
                  in bankruptcy or for an arrangement pursuant to any present or
                  future state or federal bankruptcy act or under a similar
                  federal or state law, or shall be adjudicated a bankrupt or
                  insolvent, or shall make a general assignment for the benefit
                  of creditors, or shall be unable to pay his debts generally as
                  they become due, or any property of the Borrower shall be
                  levied upon or attached in any proceeding.

8.       Demand, presentment, protest and notice of nonpayment and dishonor of
         this Note are hereby waived.

9.       This Note shall be governed by and construed in accordance with the
         laws of the State of Minnesota.

                                       AERO SYSTEMS ENGINEERING, INC.
                                       a Minnesota Corporation

                                       By: /s/ CHARLES LOUX
                                          --------------------------------------
                                               Charles Loux
                                               Its: President and Chief
                                                     Executive Officer

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