STANDBY PURCHASE
AGREEMENT

    


    February
15, 2011

    


    Pittsburgh
& West Virginia Railroad

    #2 Port
Amherst Drive

    Charleston,
West Virginia 25306

    


    Dear
Pittsburgh & West Virginia Railroad:

    


    This
letter confirms our agreement with respect to the intention of Pittsburgh &
West Virginia Railroad., a Pennsylvania unincorporated business trust (the
“Company”), to
raise additional capital through a rights offering, of 113,250 shares (the “Underlying Shares”)
of the Company’s common shares, no par value per share (the “Common Shares”), to
its shareholders of record as of date to be determined (“Rights Offering”)
with the participation of the Standby Purchaser for any unsubscribed shares in
the Rights Offering (The Rights Offering and the offering to the Standby
Purchaser are hereinafter referred to as the “Offering”).
Capitalized terms used herein and not defined herein shall have the meanings set
forth in the Prospectus (as hereinafter defined).

    


    A
REGISTRATION STATEMENT ON FORM S-3 (THE “REGISTRATION
STATEMENT”) RELATING TO THE COMPANY’S COMMON SHARES WILL BE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON FEBRUARY 15,
2011. NO OFFER TO BUY SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE
PRICE CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND
ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF
ANY KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE
EFFECTIVE DATE.

    


    1. Purchase and Sale of
Unsubscribed Shares.   Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to issue and sell to Hudson Bay Partners, LP as a standby
purchaser (the “Standby Purchaser”),
and the Standby Purchaser agrees to purchase from the Company, at the
subscription price set forth in the Rights Offering (the “Subscription Price”),
the number of Underlying Shares, (up to 113,250 Underlying Shares in
total) (the “Standby
Shares”), that remain available for subscription after allocating all of
the Underlying Shares validly subscribed for through the exercise of rights (the
“Rights”) in
the Rights Offering (such remaining shares being hereinafter referred to as the
“Unsubscribed
Shares”).

    


    2. The Closing.
  As soon as practicable following its determination of the number of
Unsubscribed Shares, the Company shall notify the Standby Purchaser of the
number of Standby Shares, if any, to be purchased by the Standby Purchaser
pursuant to Section l. The delivery of and payment for the Standby Shares shall
take place at the offices of Morrison & Cohen LLP, 909 Third Avenue, New
York, New York 10022, or such other location as the parties agree, promptly
following the expiration date of the Rights Offering, such time and date to be
not more than ten (10) business days after the foregoing notification and
to be specified therein (such time and date being referred to as the “Closing Time,” the
date of the Closing Time being referred to as the “Closing Date” and the
consummation of the transaction being referred to as the “Closing”).

    


    3. Delivery of Standby
Shares.   At the Closing, the Standby Shares to be
purchased by the Standby Purchaser hereunder, registered in the name of the
Standby Purchaser or its assignee and/or nominee(s), as the Standby Purchaser
may specify in writing at least three (3) days prior to the Closing Date,
shall be delivered by or on behalf of the Company to the Standby Purchaser, for
the Standby Purchaser’s account, against delivery by the Standby Purchaser of
the Subscription Price therefor in immediately available funds in the form of
one or more federal funds checks or a wire transfer to an account designated by
the Company.


    
      
         


      

      
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    4. Representations and
Warranties.  The Company and the Standby Purchaser hereby confirm
their agreement as follows:

    
       

      (a) The
Company represents and warrants to, and covenants with, the Standby Purchaser as
follows:

    

    


    
      	
               
      

            	
              (i)

            	
              The
      Company has filed a Registration Statement relating to the Offering on
      Form S-3 with the SEC and all amendments thereto. Such Registration
      Statement as amended at the time it becomes effective (the “Effective
      Date”), including all exhibits and all information incorporated
      therein by reference, is herein called the “Registration
      Statement.” The prospectus filed with the SEC pursuant to the
      Securities Act of 1933 (the “Securities
      Act”) and the regulations promulgated thereunder (“Regulations”),
      and which constitutes a part of the Registration Statement, as amended,
      supplemented and otherwise finalized, and all information incorporated
      therein by reference, is herein called the “Prospectus.”

            


    

    


    
      	
               
      

            	
              (ii)

            	
              The
      Underlying Shares and the Standby Shares have been duly authorized by the
      Company, and when issued and delivered by the Company against payment
      therefor, will be duly and validly issued, fully paid and non-assessable.
      The Rights have been duly authorized by the Company, and when issued and
      delivered by the Company, will constitute valid and legally binding
      obligations of the Company, subject to bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium and similar laws of general
      applicability relating to or affecting creditors’ rights and to general
      equity principles.

            


    

    


    
      	
               
      

            	
              (iii)

            	
              The
      Company is an unincorporated business trust and is validly existing as a
      business trust in good standing under the laws of the State of
      Pennsylvania, with the requisite power and authority to perform its
      obligations under this Agreement.

            


    

    


    
      	
               
      

            	
              (iv)

            	
              The
      execution, delivery and performance of this Agreement by the Company and
      the consummation by the Company of the transactions contemplated hereby
      have been duly authorized by all necessary corporate action of the
      Company; this Agreement has been duly executed and delivered by the
      Company; and this Agreement, when duly executed and delivered by the
      Standby Purchaser, will constitute a valid and legally binding agreement
      of the Company enforceable against it in accordance with its terms, except
      as may be limited by bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability
      relating to or affecting creditors’ rights and to general equity
      principles.

            


    

    


    
      	
               
      

            	
              (v)

            	
              On
      the Closing Date, on the Effective Date, at each time the Registration
      Statement or any amendment or supplement thereto was filed with the SEC
      pursuant to the Securities Act and the Regulations and at each time a sale
      of securities in connection with the Offering was agreed, (a) the
      Registration Statement and the Prospectus complied and will comply in all
      material respects with the requirements of the Securities Act and the
      Regulations; and (b) neither the Registration Statement nor the Prospectus
      contained or will contain an untrue statement of a material fact or omit
      to state a material fact required to be stated therein or necessary to
      make the statements therein, in the light of the circumstances under which
      they were made, not misleading; except that the foregoing does not apply
      to statements or omissions in the Registration Statement or the Prospectus
      made in reliance upon and in conformity with information furnished by the
      Standby Purchaser to the Company expressly for use
  therein.

            


    


    
      
         


      

      
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              (vi)

            	
              Neither
      the Company nor any of its direct or indirect subsidiaries (“Subsidiaries”)
      is in violation of its articles of incorporation, articles of
      organization, code of regulations or operating agreement, or in default
      under any agreement, indenture or instrument to which the Company or any
      of its Subsidiaries is a party, the effect of which violation or default
      would be material to the business, properties, financial condition or
      results of operations of the Company and its Subsidiaries, taken as a
      whole, and the execution, delivery and performance of this Agreement by
      the Company and the consummation of the transactions contemplated hereby
      will not result in the creation or imposition of any lien, charge or
      encumbrance upon any of the assets of the Company or its Subsidiaries or
      conflict with, or constitute or result in a breach of or default under, or
      the terms of any agreement, indenture or instrument to which the Company
      or any of its Subsidiaries is a party or by which any of the Company’s or
      any Subsidiary’s properties or assets are bound, or result in a violation
      of the certificate of incorporation, articles of association, certificate
      of trust or code of regulations of the Company or any of its Subsidiaries
      or any order, rule or regulation of any court or governmental agency
      having jurisdiction over the Company, any of its Subsidiaries or any of
      their property; and, except as required by the Regulations, the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”),
      and applicable state securities law, no consent, authorization or order
      of, or filing or registration with, any court or governmental agency is
      required for the execution, delivery and performance of this
      Agreement.

            


    

    


    
      	
               
      

            	
              (vii)

            	
              The
      Company is not, and after giving effect to the Offering and the
      application of the proceeds thereof as described in the Prospectus will
      not be,
      required to register as an “investment company” as such term is defined in
      the Investment Company Act of 1940.

            


    

    


    
      	
               
      

            	
              (viii)

            	
              There
      is and has been no failure on the part of the Company and any of the
      Company’s trustees or officers (other than David Lesser, as to whom the
      Company makes no representation), in their capacities as such, to comply
      with any provision of the Sarbanes-Oxley Act of 2002 and the rules and
      regulations promulgated in connection
therewith.

            


    

    


    
      	
               
      

            	
              (ix)

            	
              The
      Company has not taken and will not take, directly or indirectly, any
      action designed to or that would constitute or that might reasonably be
      expected to cause or result in, under the Exchange Act or otherwise,
      stabilization or manipulation of the price of any security of the Company
      in order to facilitate the sale or resale of any securities of the
      Company, and the Company is not aware of any such action taken or to be
      taken by any person.

            


    

    


    
      (b) The
Standby Purchaser represents and warrants to, and covenants with, the Company as
follows:

    

    


    
      	
               
      

            	
              (i)

            	
              The
      Standby Purchaser is a Limited Partnership duly organized, validly
      existing and in good standing under the laws of its jurisdiction, with
      full power and authority to perform its obligations under this
      Agreement.

            


    

    


    
      	
               
      

            	
              (ii)

            	
              The
      Standby Purchaser has received from the Company and has reviewed a copy of
      the Prospectus as well as the public documents filed in connection
      therewith through the date hereof, and except as set forth in this
      Agreement and in the Prospectus, the Standby Purchaser is not relying on
      any information other than information contained in this Agreement or the
      Prospectus.

            


    

    


    
      	
               
      

            	
              (iii)

            	
              The
      Standby Purchaser is acquiring the Standby Shares pursuant to this
      Agreement for its own account for investment only and not with a view to
      any resale, distribution or other disposition thereof except as provided
      herein.

            


    

    


    
      	
               
      

            	
              (iv)

            	
              The
      execution, delivery and performance of this Agreement by the Standby
      Purchaser and the consummation by the Standby Purchaser of the
      transactions contemplated hereby have been duly authorized by all
      necessary action of the Standby Purchaser; and this Agreement, when duly
      executed and delivered by the Standby Purchaser, will constitute a valid
      and legally binding instrument, enforceable in accordance with its terms,
      subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
      moratorium and similar laws of general applicability relating to or
      affecting creditors’ fights and to general equity
    principles.

            


    


    
      
         


      

      
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              (v)

            	
              The
      Standby Purchaser is not insolvent and has sufficient financial ability to
      purchase the Standby Shares on the terms and conditions contained in this
      Agreement and will have the necessary funds on the Closing
      Date.

            


    

    


    
      	
               
      

            	
              (vi)

            	
              No
      state, federal or foreign regulatory approvals, permits, licenses or
      consents or other contractual or legal obligations are required with
      respect to the Standby Purchaser in order for the Standby Purchaser to
      enter into this Agreement or purchase the Standby
  Shares.

            


    

    


    
      	
               
      

            	
              (vii)

            	
              The
      execution and delivery of this Agreement, the consummation by the Standby
      Purchaser of the transactions herein contemplated and the compliance by
      the Standby Purchaser with the terms hereof do not and will not conflict
      with, or result in a breach or violation of any of the terms or provisions
      of, or constitute a default under, any indenture, mortgage, deed of trust,
      loan agreement or other agreement or instrument to which the Standby
      Purchaser is a party or by which any of the Standby Purchaser’s properties
      or assets are bound, or any applicable law, rule, regulation, judgment,
      order or decree of any government, governmental instrumentality or court,
      domestic or foreign, having jurisdiction over the Standby Purchaser or any
      of the Standby Purchaser’s properties or assets; and no consent, approval,
      authorization, order, registration or qualification of or with any such
      government, governmental instrumentality or court, domestic or foreign, is
      required for the valid authorization, execution, delivery and performance
      by the Standby Purchaser of this Agreement or the consummation by the
      Standby Purchaser of its obligations in connection with the transactions
      contemplated by this Agreement that will not have been obtained prior to
      the Closing.

            


    

    


    
      	
               
      

            	
              (viii)

            	
              The
      Standby Purchaser has not taken and will not take, directly or indirectly,
      any action designed to or that would constitute or that might reasonably
      be expected to cause or result in, under the Exchange Act or otherwise,
      stabilization or manipulation of the price of any security of the Company
      in order to facilitate the sale or resale of any securities of the
      Company, and the Standby Purchaser is not aware of any such action taken
      or to be taken by any person.

            


    

    


    5. Conditions. The
respective obligations of the Company to sell and the Standby Purchaser to
purchase Standby Shares as set forth in this Agreement are subject to the
following conditions:

    


    
      	
               
      

            	
              (a)

            	
              No
      order suspending the effectiveness of the Registration Statement or any
      amendment or supplement thereto shall have been issued and no proceedings
      for such purpose shall be pending before or, to the knowledge of the
      Company or the Standby Purchaser, threatened by the SEC and any requests
      for additional information by the SEC (to be included in the Registration
      Statement, in the Prospectus or otherwise) shall have been complied
      with.

            


    

    


    
      	
               
      

            	
              (b)

            	
              The
      representations and warranties of the Company and the Standby Purchaser
      contained herein shall be true and correct as of the Closing Date, and the
      Company and the Standby Purchaser shall each have performed all covenants
      and agreements herein required to be performed on its part at or prior to
      the Closing Date.

            


    

    


    
      	
               
      

            	
              (c)

            	
              The
      Company shall have conducted the Rights Offering substantially in the
      manner described in the Registration
Statement.

            


    

    


    
      	
               
      

            	
              (d)

            	
              There
      shall not have occurred any material adverse change, or any development
      involving a prospective material adverse change, in the condition,
      financial or otherwise, or in the earnings, business or operations of the
      Company and its Subsidiaries, taken as a whole, from that set forth in the
      Prospectus as of the date of this
Agreement.

            


    


    
      
         


      

      
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    6. Termination.

    


    
      	
               
      

            	
              (a) 

            	
              The
      Standby Purchaser may terminate this Agreement (i) upon the
      occurrence of a suspension of trading in the Common Shares, the
      establishment of limited or minimum prices for the Common Shares or a
      general suspension of trading in or the establishment of limited or
      minimum prices on the New York Stock Exchange, the American Stock Exchange
      or the Nasdaq National Market, any banking moratorium in the United
      States, any suspension of payments with respect to banks in the United
      States or a declaration of war or national emergency in the United States,
      (ii) prior to the expiration of the Offering, if the Company
      experiences a material adverse change in its financial condition from its
      financial condition at December 31, 2010 and (iii) if the Company
      materially breaches the Standby Purchase Agreement, and such breach is not
      cured within three (3) days.

            


    

    


    
      	
               
      

            	
              (b) 

            	
              In
      the event (x) the Company, in its reasonable judgment, determines
      that it is not in the best interests of the Company and its shareholders
      to go forward with the Rights Offering or (y) consummation of the Rights
      Offering is prohibited by law, rule or regulation and the Company
      terminates the Rights Offering.

            


    

    


    
      	
               
      

            	
              (c) 

            	
              Either
      of the parties hereto may terminate this Agreement if the transactions
      contemplated hereby are not consummated by March 31, 2011, through no
      fault of the terminating party. In addition, this Agreement shall
      terminate upon mutual consent of the parties
  hereto.

            


    

    


    
      	
               
      

            	
              (d) 

            	
              The
      Company and the Standby Purchaser hereby agree that any termination of
      this Agreement pursuant to Sections 7(a), (b) or (c) (other than
      termination by one party in the event of a breach of this Agreement by the
      other party or a misrepresentation of any of the statements made hereby by
      the other party), shall be without liability of the Company or the Standby
      Purchaser.

            


    

    


    7. Continuing
Provisions. The representations and warranties of the Company and the
Standby Purchaser set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date.
All of the covenants, agreements and obligations of each of the Company and the
Standby Purchaser required to be performed by the Closing Date shall have been
duly performed and complied with by the Closing Date unless such performance
shall have been waived in writing by the Company or the Standby Purchaser, as
the case may be. The respective representations, warranties, covenants,
agreements and obligations of the parties to this Agreement shall survive the
Closing Date.

    


    8. Recapitalization.
Other than as disclosed in the Prospectus, prior to Closing, the Company shall
not split, combine, reclassify or repurchase any of its capital stock or declare
or pay any extraordinary dividends on any of its capital stock.

    


    9.  Miscellaneous. This
Agreement is made solely for the benefit of the Standby Purchaser and the
Company, and their respective successors and permitted assigns, and no other
person, partnership, association or corporation shall acquire or have any right
under or by virtue of this Agreement.

    


    10. Assignment. The
Standby Purchaser intends to assign all or a portion of its purchase right
contemplated hereunder to an affiliate which will be under common control with
the Standby Purchaser and which in turn will make the investment.  In
addition, the Standby Purchaser will have the right to assign a portion of the
purchase right contemplated hereunder to members of the Board of Directors of
the Company and to affiliates, employees or consultants of Hudson Bay Partners,
LP.  Such assignments will not relieve the Standby Purchaser of its
purchase obligations contemplated hereunder.

    


    11. Entire
Agreement.  This Agreement constitutes the entire agreement and
understanding between the Standby Purchaser and the Company, and supersedes all
prior agreements and understandings relating to the subject matter hereof. In
case any one or more of the provisions contained in this Agreement, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect under the laws of any jurisdiction, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way affected or
impaired thereby or under the laws of any other jurisdiction.


    
      
         


      

      
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    12. Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original, and all such counterparts together
constitute but one and the same instrument.

    


    13. Amendments.  This
Agreement may not be amended, modified or changed, in whole or in part, except
by an instrument in writing signed by the Company and the Standby
Purchaser.

    


    14. Notices. Except as
otherwise provided in this Agreement, and unless otherwise notified by the
respective addressee, all notices and communications hereunder shall be in
writing and mailed or delivered or by facsimile or telephone if subsequently
confirmed in writing, to:

    


    If to the Company:

    


    Pittsburgh & West Virginia
Railroad

    #2 Port
Amherst Drive

    Charleston,
West Virginia 25306

    Attention:
Robert McCoy, Secretary and Treasurer

    Telephone: 304-926-1124

    


    With a copy to:

    


    Morrison
& Cohen LLP

    909 Third
Avenue

    New York,
New York 10022

    Attention:
Richard Baumann

    Facsimile: 917-522-9934

    


    If to the Standby
Purchaser:

    


    Hudson Bay Partners, LP

    55 Edison Ave.

    West Babylon, NY 11704

    Attention:  David
Lesser

    Facsimile: 212-202-5415

    


    16. Applicable Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of laws rules
thereof.

    


    17. Business
Day.  The term “business day” shall
mean a day on which banking institutions are open generally in New
York.


    
      
         


      

      
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    IN WITNESS WHEREOF, and
intending to be legally bound hereby, each of the Standby Purchaser and the
Company has signed or caused to be signed its name as of the day and year first
above written.

    


    
      	 
      	
              HUDSON
      BAY PARTNERS, LP

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name: 

            	
              David
      Lesser

            
	 
      	
              Title:

            	
              President
      – General Partner

            


    

    


    
      	
              Agreed
      and Accepted

            	 
      
	
              As
      of the 15 day of February 2011

            	 
      
	 
      	 
      
	
              PITTSBURGH
      & WEST VIRGINIA RAILROAD

            	 
      
	 
      	 
      	 
      
	
              By:

            	 
      	 
      
	
              Name:

            	 
      	 
      
	
              Title:

            	 
      	 
      


    


    
      
         


      

      
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