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NEW CASTLE, Pa., Jan. 15 /PRNewswire-FirstCall/ -- Axion Power International, Inc. (Pink sheets: AXPW) announced today that it has entered into a definitive financing agreement with The Quercus Trust of Los Angeles, California ("Quercus"). Under this agreement, Quercus has committed to make a staged $18 million equity investment in Axion over the next six months. In yesterday's initial closing, Quercus bought 1,904,762 units for $4,000,000, or $2.10 per unit. Each initial closing unit consisted of one share of Common Stock, and a 5-year Warrant to purchase 1.5 shares of Common Stock at an exercise price of $2.60 per share. The second closing will occur five days after Axion brings its SEC reporting current, which is expected during the first quarter of 2008. At that time, Quercus has agreed to buy 1,904,762 additional units for $4,000,000. Each second closing unit will consist of one share of Common Stock, and a 5-year Warrant to purchase 1.25 shares of Common Stock at an exercise price of $2.60 per share. Subject to the satisfaction of certain conditions, Quercus has agreed to buy 4,761,905 additional units for $10,000,000. Each third closing unit will consist of one share of Common Stock, and a 5-year Warrant to purchase one share of Common Stock at an exercise price of $2.60 per share. Axion and Quercus expect to complete all three closings by the end of June 2008. Merriman Curhan Ford and Co. (AMEX:MEM) acted as sole placement agent for the transaction. Fefer Petersen & Cie (http://www.ipo-law.com/) and Andrews Kurth LLP (http://www.akllp.com/) acted as legal advisors to Axion. Greenberg Glusker (http://www.ggfirm.com/) acted as legal advisor to Quercus. Tom Granville, Axion's CEO said, "We are extremely happy that Quercus has chosen to become a strategic investor in Axion. Over the last year, Quercus has established itself as a leading strategic investor in the alternative energy and clean tech sectors by investing in emerging companies like ours. We applaud their continued commitment to companies like Axion that provide environmentally sound solutions for global energy issues. This staged investment from Quercus should give us sufficient capital to complete our process development work, expand our manufacturing capabilities and begin marketing commercial battery products that are based on our exciting new PbC(TM) technology." About Axion Power International, Inc. Axion has developed and patented a next generation energy storage device that won the prestigious 2006 Frost & Sullivan Technology Innovation Award for North America in the field of lead-acid batteries. According to Frost & Sullivan, Axion's new PbC batteries have "the potential to revitalize the lead-acid battery industry by breathing new life into an established technology that was not well-suited to the requirements of important new applications like hybrid electric vehicles and renewable power." PbC(TM) batteries use sophisticated carbon electrode assemblies to replace the simple lead-based negative electrodes used by other lead-acid battery manufacturers. The resulting device offers energy storage approaching lead acid batteries, coupled with far longer cycle life and power output approaching super-capacitors. These low-cost devices recharge rapidly and are environmentally friendly because they use 40% less lead. Axion has been producing prototype PbC batteries at its lead-acid battery plant in New Castle, Pennsylvania for more than a year using the same cases, positive electrodes, separators, electrolytes and manufacturing equipment used in its other lead-acid battery lines. The only notable manufacturing difference is the use of Axion's proprietary carbon electrode assemblies instead of lead- based negative electrodes. Axion believes its PbC batteries are the only class of advanced battery that can be assembled on existing lead-acid battery production lines without significant changes to production equipment and fabrication processes. It also believes it will be able to manufacture carbon electrode assemblies in volume at low cost using standard production methods that are commonly used in other industries. When its electrode manufacturing methods are fully developed, Axion believes it will be able to sell carbon electrode assemblies as virtual plug and play replacements for the lead based negative electrodes used by all other lead acid battery manufacturers. Axion's goal is to become the leading supplier of carbon electrode assemblies for the lead-acid battery industry. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These statements include, without limitation, statements concerning the effect of the staged investment by Quercus, the timing of the Company's future SEC reporting, the Company's belief that the funds from the completed investment would provide sufficient capital liquidity to complete its process development work, expand its manufacturing capabilities and bring its new PbC based battery products to market, the Company's belief that its completed products will be the only class of advance battery of its kind and that it will be viable replacements for older generation lead-acid batteries. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include the risk that the Company does not receive the additional $14 million in investment funds, or that the funds do not prove sufficient for the Company to complete its development work, as well as the risks inherent in commercializing a new product (including technology risks, market risks, financial risks and implementation risks, as well as other risks and uncertainties affecting the Company), and other risks that have been included in filings with the Securities and Exchange Commission, all of which are available at http://www.sec.gov/. We disclaim any intention or obligation to revise any forward-looking statements, including, without limitation, financial estimates, whether as a result of new information, future events, or otherwise. DATASOURCE: Axion Power International, Inc. CONTACT: Investors, Rudy Barrio, , or Media, Brian Kennedy, , both of Allen & Caron, +1-212-691-8087; or Kelly Gubish of Axion Power International, Inc., +1-724-654-9300, Web site: http://www.axionpower.com/ http://www.allencaron.com/

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