0001104659-03-009957.txt : 20030515 0001104659-03-009957.hdr.sgml : 20030515 20030514192720 ACCESSION NUMBER: 0001104659-03-009957 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXWELL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000319815 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 952390133 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15477 FILM NUMBER: 03700709 BUSINESS ADDRESS: STREET 1: 8888 BALBOA AVENUE CITY: SAN DIEGO STATE: CA ZIP: 92123 BUSINESS PHONE: 8582795100 MAIL ADDRESS: STREET 1: 8888 BALBOA AVENUE CITY: SAN DIEGO STATE: CA ZIP: 92123 FORMER COMPANY: FORMER CONFORMED NAME: MAXWELL LABORATORIES INC /DE/ DATE OF NAME CHANGE: 19920703 10-Q 1 j1027_10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2003

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 0-10964

MAXWELL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		95-2390133
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9244 Balboa Avenue, San Diego, CA		92123
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (858) 503-3300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý No o

As of May 9, 2003, Registrant had only one class of common stock, of which there were 13,754,654 shares outstanding.

MAXWELL TECHNOLOGIES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarter ended March 31, 2003

PART I

Item 1.	Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures

PART II

Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “Maxwell,” the “Company,” “we,” “us,” and “our” refer to Maxwell Technologies, Inc. and its subsidiaries; all references to “Montena Components” refer to our subsidiary Montena Components, Ltd. which has been renamed to Maxwell Technologies, SA; all references to “Electronic Components Group” refer to our former subsidiary, Maxwell Electronic Components Group, Inc. which has been merged into Maxwell; all references to “I-Bus/Phoenix” refer to our subsidiary, I-Bus/Phoenix, Inc., and its subsidiaries; and all references to “PurePulse” refer to our subsidiary, PurePulse Technologies, Inc. This Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties. The Company’s actual results may differ significantly from the results discussed in any forward-looking statements. Factors that might cause such a difference include, but are not limited to those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Discussions containing such forward-looking statements may be found in the material set forth under “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as within this Form 10-Q generally.

MAXWELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

	March 31 2003			December 31 2002
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,619		$	3,545
Short-term investments	5,595			7,546
Trade and other accounts receivable, net	6,363			8,530
Inventories	11,584			11,833
Prepaid expenses and other current assets	1,114			1,037
Assets held-for-sale	7,356			7,356

Total current assets	36,631			39,847
Property, plant and equipment, net	11,237			11,653
Other intangible assets, net	2,046			2,009
Goodwill	17,716			17,577
Other non-current assets	295			294
	$	67,925		$	71,380

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	8,294		$	11,508
Deferred revenue	5,098			2,305
Accrued employee compensation	1,900			1,590
Short-term borrowings and current portion of long-term debt	3,484			570
Deferred tax liability	279			272
Liabilities of discontinued operations	2,573			2,326

Total current liabilities	21,628			18,571

Deferred tax liability	183			183
Long-term debt, excluding current portion	—			2,675
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value per share, 40,000 shares authorized; 13,765 and 13,726 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively	1,377			1,373
Additional paid-in capital	112,372			112,255
Accumulated deficit	(68,376		)	(64,015		)
Accumulated other comprehensive income	741			338
Total stockholders’ equity	46,114			49,951
	$	67,925		$	71,380

MAXWELL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended March 31,
	2003			2002

Sales	$	10,241		$	12,789
Costs and expenses:
Cost of sales	8,930			11,842
Selling, general and administrative	4,040			4,691
Research and development	1,307			2,667
Other	(236		)	(214		)
Total costs and expenses	14,041			18,986
Loss from continuing operations before income taxes	(3,800		)	(6,197		)
Provision for income taxes	(14		)	(291		)
Loss from continuing operations	(3,786		)	(5,906		)
Discontinued operations, net of taxes:
Loss from operations	(575		)	(805		)
Gain on disposal	—			—
Net loss from discontinued operations	(575		)	(805		)

Net loss	$	(4,361	)	$	(6,711	)

Basic net loss per share:
Loss from continuing operations	$	(0.28	)	$	(0.57	)
Loss from discontinued operations	(0.04		)	(0.08		)
Net loss	$	(0.32	)	$	(0.65	)

Liabilities of discontinued operations
Loss from continuing operations	$	(0.28	)	$	(0.57	)
Loss from discontinued operations	(0.04		)	(0.08		)
Net loss	$	(0.32	)	$	(0.65	)

Shares used in computing:
Basic net loss per share	13,741			10,395
Diluted net loss per share	13,741			10,395

MAXWELL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2003			2002
Operating activities:
Loss from continuing operations	$	(3,786	)	$	(5,906	)
Adjustments to reconcile loss from continuing operating activities, net of cash used in operating activities:
Depreciation and amortization	877			1,069
Other noncash items	(222		)	(241		)
Changes in operating assets and liabilities, net	2,352			40

Net cash used in operating activities	(779		)	(5,038		)
Investing activities:
Proceeds from sale of businesses and equipment	278			—
Purchases of property and equipment	(397		)	(468		)
Proceeds from sale of short-term investments	2,836			7,739
Purchases of short-term investments	(924		)	(5,067		)
Net cash provided by investing activities	1,793			2,204
Financing activities:
Principal payments on long-term debt and short-term borrowings	(75		)	(50		)
Proceeds from short-term borrowings	314			—
Proceeds from issuance of Company and subsidiary stock	121			446
Net cash provided by financing activities	360			396
Net cash provided by (used in) discontinued operations	(328		)	915
Effect of exchange rate changes on cash and cash equivalents	28			(2		)
Increase (decrease) in cash and cash equivalents	1,074			(1,525		)
Cash and cash equivalents at beginning of period	3,545			13,673
Cash and cash equivalents at end of period	$	4,619		$	12,148

MAXWELL TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the interim periods presented. These adjustments consist of normal recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required by generally accepted accounting principles. For further information refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ from those estimates.

New Accounting Pronouncements. In June 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146). This statement supercedes Emerging Issues Task Force (EITF) issue No. 94-3 “Liabilities Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for cost associated with an exit or disposal activity be recognized at the date an entity commits to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS No. 146 is effective for any exit and disposal activities initiated after December 31, 2002.

In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires certain disclosures about each of the entity’s guarantees. The Company will apply the recognition provisions of FIN 45 to any guarantees issued after December 31, 2002.

In December 2002, the FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation- Transition and Disclosure- an amendment of FASB Statement No. 123” (SFAS No. 148). This statement amends SFAS No. 123 “Accounting for Stock Based Compensation” (SFAS No. 123) to provide alternative methods of voluntarily transitioning to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require disclosure of the method used to account for stock-based employee compensation and the effects of the method on reported results in both annual and interim financial statements. The disclosure provisions were effective for the Company’s year ended December 31, 2002. The Company has not yet completed the final evaluation of the options presented by SFAS No. 148. However, within the next year the company expects to reach a determination of whether and, if so, when to change the Company’s existing accounting for stock-based compensation to the fair value method in accordance with the transition alternatives of SFAS No. 148.

Note 2– Strategic Alliance

The Company has formed an alliance with Yeong-Long Technologies Co., Ltd., (“Yeong-Long”) to manufacture and market its proprietary BOOSTCAP® ultracapacitor products in China. The alliance grants an exclusive royalty-bearing license to Yeong-Long to manufacture and sell BOOSTCAP products in China, and to sell to other mutually agreed customers elsewhere in Asia. In addition to the license, the Company will supply Yeong-Long with proprietary electrode material to make ultracapacitor cells, and will begin purchasing finished

ultracapacitors from Yeong-Long in 2004 to supplement its internal production capacity. Under the terms of the arrangement, the Company received an initial payment of $3 million and can receive additional payments totaling $2 million based on the satisfaction of certain conditions. Maxwell will also receive payments for the supply of electrode material as well as a royalty on Yeong-Long’s ultracapacitor sales. Maxwell has offered Yeong-Long the option to buy the right to manufacture the electrode material for a separate payment. The Company has accounted for its arrangement with Yeong-Long in accordance with EITF 00-21: Revenue Arrangements with Multiple Deliverables (“EITF 00-21”). Under the provisions of EITF 00-21, the Company has determined that the delivery of the manufacturing licenses to Yeong-Long and the option to buy the right to manufacture the electrode material represent a separate unit of accounting. Accordingly, the Company has deferred recognition of the initial $3 million until the delivery of certain technology and the exercise or expiration of the electrode material purchase option. The supply of electrode material to Yeong-Long has been determined to represent a separate unit of accounting and revenue will be recognized as the material is delivered.

Note 3 – Inventories

Inventories consist of the following (in thousands):

	March 31, 2003			December 31, 2002
Inventory:
Finished goods	$	5,352		$	4,495
Work-in-process	2,003			2,130
Raw material and purchased parts	6,830			7,234
Inventory reserve	(2,601		)	(2,026		)
	$	11,584		$	11,833

Note 4 – Warranty Reserve

The Company provides limited warranties on certain of its products for periods of up to 2 years. The Company recognizes warranty reserves when products are shipped based upon an estimate of total warranty costs, and such reserves are included in accrued liabilities. The estimate of such costs is based upon historical and anticipated requirements.

			Additions
	Balance at As of December 31, 2002		Charges to Cost and Expenses		Deductions For Costs Incurred			Deductions For Change in Estimate		Balance at As of March 31, 2003

Accrued Warranty	$	947	$	393	$	(352	)	$	—	$	988

Note 5 – Comprehensive Income

The following table sets forth the components of comprehensive income (in thousands):

	Three Months Ended March 31,
	2003			2002
Net loss	$	(4,361	)	$	(6,711	)
Foreign currency translation adjustments	442			(15		)
Unrealized loss on securities	(39		)	(55		)
Comprehensive loss	$	(3,958	)	$	(6,781	)

Note 6 – Business Segments

The following table displays summarized information about the Company’s operations by business segment (in thousands):

	For the Three Months Ended March 31,
	2003			2002
Revenue:
High Reliability	$	7,833		$	7,555
Winding Equipment	2,408			—
I-Bus Computing Systems	—			4,139
Sierra and TeknaSeal	—			1,095
Consolidated total	$	10,241		$	12,789

Income (loss):
High Reliability	$	(2,495	)	$	(3,030	)
Winding Equipment	(237		)	—
I-Bus Computing Systems	(114		)	(2,721		)
Sierra and TeknaSeal	—			274
Total segment operating loss	(2,846		)	(5,477		)
Corporate expenses	1,209			934
(Gain) loss on sale of businesses	(228		)	—
Minority interest	—			(241		)
Interest and other, net	(27		)	27

Loss from continuing operations before income taxes	$	(3,800	)	$	(6,197	)

Note 7 – Restructuring

The following table displays the activity and balances of the restructuring reserve (in thousands):

	Severance Costs for Involuntary Employee Terminations			Costs to Exit Certain Contractual and Lease Obligations		Moving and Other Costs Related to Consolidation of Facilities		Total Restructuring Charges
Balance December 31, 2002	$	304		$	47	$	—	$	351
Reserves established:
Utilization of reserves:
Cash	(151		)	—		—		(151		)

Balance March 31, 2003	$	153		$	47	$	—	$	200

Item 8 – Stock Compensation

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation.

Pro forma information regarding net loss and loss per share is required by SFAS No. 123, Accounting for Stock-based Compensation, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information is as follows (in thousands, except for net loss per share information):

	Three Months ended March 31,
	2003			2002
Loss from continuing operations as reported	$	(3,786	)	$	(5,906	)
Pro forma loss from continuing operations	$	(5,613	)	$	(9,228	)

Loss from continuing operations, per share, as reported	$	(0.28	)	$	(0.57	)
Pro forma loss from continuing operations per share	$	(0.41	)	$	(0.89	)

The fair value for these options was estimated at the dates of grant using the Black-Scholes option valuation model with the following weighted-average assumptions.

	2003	2002
Risk free interest rate	3.3	3.3
Dividend yield	0	0
Volatility	50.3	68.4
Weighted average expected life	5 years	5 years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Note 9 – Discontinued Operations

In 2001, the Company sold its defense contracting business and committed to strategic alternatives for PurePulse, with the objective to sell all or a majority interest in the business. Accordingly, both the defense contracting business and PurePulse, each of which was previously classified as a separate segment, comprise discontinued operations for financial reporting purposes. In September 2002, the Company decided to suspend the operations of PurePulse.

Operating results of the Company’s discontinued operations are shown separately, net of tax, in the accompanying condensed consolidated statements of operations. The businesses included in discontinued operations had sales aggregating $180,000 for the three months ended March 31, 2003 and $228,000 for the three months ended March 31, 2002. In the three months ended March 31, 2003, the Company revised an estimate for a lease obligation related to its defense contracting business and recorded a charge of $720,000.

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Like many other high technology and industrial enterprises that are having difficult times with bookings and revenue, Maxwell Technologies’ sales have suffered from a generally weak manufacturing environment. On one side of the spectrum the commercial satellite market for our microelectronics products is very weak, and on the opposite side of the spectrum the electrical infrastructure redevelopment market for our high-voltage capacitors in the United States is on hold due to lower demand for power and very large state budget deficits. These secular factors have depressed sales and bookings in our High Reliability segment. As a result of this general economic environment and the impact of sudden acute respiratory syndrome (SARS), it is very difficult to forecast revenue trends for the next several quarters.

However, it is possible to measure Maxwell’s progress in two areas, first market share, and second cost containment.

Our win-ratio in the High Reliability segment continues to hold steady or grow.

• Our microelectronics group wins the majority of the business that is available to us, and we are introducing a much larger suite of products to expand our business range.

• Our BoostCap® ultracapacitors’ penetration is growing significantly, and we are increasing market-share. We are introducing power systems products quarter in the second quarter of 2003, which will utilize our BOOSTCAP ultracapactors in a system that provides up time in high availability applications and will expand our penetration into telecom and industrial markets.

• In High Tension we continue to hold market share and are introducing new capacitor products for utility infrastructure to protect voltage metering and measurement instruments.

We continue to focus on cost containment, both through headcount reduction and cash management. Global headcount has been reduced 9% during the first quarter of 2003 through business consolidations and direct headcount reductions. Our forward-going economic leverage is very high; on average, over 50% of each revenue dollar is a direct contributor to margin. Based on our current product mix and cost structure, our break-even point has been reduced substantially to approximately $15 million in revenue per quarter.

Another significant milestone achieved in the first quarter was the formation of an ultracapacitor manufacturing and marketing alliance in China with Yeong-Long Technologies Co., Ltd., a $200 million per annum manufacturer of electrolytic capacitors. This arrangement could contribute up to $5 million in cash, and establishes ultracapacitor production facilities in China to complement our existing facilities in the U.S. and Europe.

Our Winding Equipment segment has been able to maintain its prior quarter revenue levels. However, approximately 80% of its current quarter revenues are attributable to customers in China. In addition, approximately 59% of our BoostCap revenues come from customers in Asia. Although not yet evident, future bookings and revenues may be adversely impacted by worsening economic activity and travel restrictions due to the outbreak of SARS.

Results of Operations

Sales

Our consolidated sales for the quarter ended March 31, 2003 were $10.2 million, a decrease of $2.5 million, or 20%, from the quarter ended March 31, 2002. Sharp declines in the sale of power systems products to GE Medical Systems, which has decided to source these products from affiliates or other companies located in low cost countries, and continued weakness in the satellite and other industrial markets served by the Company negatively impacted reported results. The decline of $3.5 million in sales of power systems products was partially offset by gains in sales of BOOSTCAP ultracapacitors. Sales increased from the acquisition of Montena Components in July of 2002, contributing approximately $5.8 million of revenue for the quarter, and decreased $5.2 million due to the divestitures of I-Bus Computing Systems and TeknaSeal in September 2002. Excluding the acquisition and the divestitures, our 2003 sales decreased $3.1 million or 42% compared to the same lines of business in 2002.

Total Costs and Expenses

Cost of sales for the quarter ended March 31, 2003 was $8.9 million, a decrease of $2.9 million, or 25%, from the quarter ended March 31, 2002. Cost of sales as a percent of net sales was 87% and 93% in 2003 and 2002, respectively. Although gross profit margins have improved because of better revenue mix and cost containment efforts, they remain depressed because of the downturn in the general economy and industrial markets served by the Company. This has resulted in inventory charges of $0.5 million for the current quarter and under-utilized production facilities.

Selling, General and Administrative (SG&A) expenses for the quarter ended March 31, 2003 were $4.0 million, a decrease of $0.7 million, or 14%, from the quarter ended March 31, 2002. SG&A as a percent of net sales was 40% and 37% in 2003 and 2002, respectively. During the current quarter, the Company recorded $0.5 million in charges related to reserves against loans made to a former subsidiary and other accruals mainly for severance, which increased current quarter SG&A expenses. SG&A as a percent of sales has increased because of these charges and higher third party commission expenses.

Research and development (R&D) expenses for the quarter ended March 31, 2003 were $1.3 million, a decrease of $1.4 million, or 51%, from the quarter ended March 31, 2002. The decrease is mainly attributable to the sale of I-Bus Computing Systems. R&D as a percent of net sales was 13% and 21% in 2003 and 2002, respectively.

Other deductions (credits) net for the quarter ended March 31, 2003 were a credit of $0.2 million, which was essentially unchanged from the quarter ended March 31, 2002. In the Company’s second fiscal quarter of 2002, it acquired the subsidiary shares that it did not already own and, therefore, no longer records amounts related to minority shareholders. In the first fiscal quarter of 2003, the Company recorded a $0.2 million gain related to contingent consideration received from the sale of TeknaSeal, which was sold in the Company’s fourth fiscal quarter of 2002. Interest (income) expense, net for the quarter ended March 31, 2003 was a credit of $27 thousand compared to an expense of $27 thousand for the quarter ended March 31, 2002. During 2002, the Company used proceeds from the sale of businesses to pay down debt and the excess was invested in high quality short-term marketable investments.

Income (Loss) From Continuing Operations Before Taxes

Losses from continuing operations before taxes was $3.8 million and $6.2 million in the quarters ended March 31 2003 and 2002, respectively.

High Reliability segment losses were $2.5 million in 2003 compared to $3.0 million in 2002. The change was due to an improved revenue mix and significant cost reductions in the Company’s San Diego operations. The acquisition of Montena Components contributed $0.1 million to the year-to-year change.

The Winding Equipment segment, which was part of our acquisition of Montena Components, recorded a loss of $0.2 million. The loss was due to a significant amount of relatively low profitability sales to customers in China.

I-Bus Computing Systems, which was disposed of in September 2002, recorded losses of $2.7 million for the quarter ended March 31 2002. The loss of $0.1 million for the quarter ended March 31 2003 relates mainly to a reserve established for amounts advanced to I-Bus Corporation.

TeknaSeal, which was sold in September 2002 generated earnings of $0.3 million in the quarter ended March 2002.

Provision (Credit) For Income Taxes

The credit for income taxes for the quarter ended March 31, 2003 was $14 thousand compared to $0.3 million for the quarter ended March 31, 2002. The credit recorded in 2002 was related to a federal tax refund for taxes paid in 2001.

Discontinued Operations

Discontinued Operations are comprised of a charge related to the Company’s Government Systems Division, which was sold in 2001, and a credit related to its PurePulse subsidiary, whose operations were suspended in 2002. The charge of $0.7 million was due to a change in the estimated liability for a certain continuing lease obligation. The credit was $0.2 million for cash received from the sale of certain remaining equipment inventory.

Liquidity and Capital Resources

Cash used by operating activities in the quarter ended March 31, 2003, was approximately $0.8 million, as compared to $5.0 million in the quarter ended March 31 2002. In February 2003, we received a non-refundable payment of $3 million from YEC, our BOOSTCAP ultracapacitor alliance partner in China, which has been classified as deferred revenue. Cash used in discontinued operations in the quarter ended March 31, 2003 was $0.3 million and consisted mainly of payments for residual lease obligations of PurePulse and the Government Systems Division. Capital expenditures for the quarters ended March 31, 2003 and 2002 were $0.4 million and $0.5 million, respectively. Capital expenditures for 2003 are not expected to exceed $2.8 million, which is approximately equal to our annual depreciation and amortization charges.

Maxwell Technologies, SA requires advances from customers for certain product lines and issues bank guarantees that give the customer the right to receive back the advance if the product is not delivered by a specific date. As of the end of March 31, 2003, we had issued guarantees of $0.3 million related to these product arrangements, most of which we expect to ship to customers in the second quarter of 2003.

Assets held for sale consist of the Company-owned building in San Diego, which housed the former I-Bus/Phoenix U.S. production and administration. We expect to sell the facility during the current fiscal year.

At present, we expect that future cash flows from operations combined with our existing cash balance and net proceeds from assets held for sale will be adequate to fund our capital equipment and working capital requirements and operating losses for more than the next twelve months.

Although we believe we have adequate cash on hand and future cash flows to meet our cash requirements, continued revenues at current depressed levels would cause continued losses and negative cash flows from operations. Therefore, the Company may need to seek additional financing in the future. Although we cannot predict with any certainty as to if or when we might need additional financing, we believe such financing would not be required for the next twelve months. If the Company needs additional financing, there can be no assurance that such financing will be available on acceptable terms or at all. In addition, if the Company does not generate sufficient cash flow from operations in line with its current forecasts, the Company may have to initiate measures to raise cash through asset sales, additional debt or equity issuances and/or curtail operations. Failure to achieve expected cash flows or, if necessary, to obtain additional debt or equity investments would have a material adverse effect on the Company.

Bank Credit Agreement

Our Maxwell Europe subsidiary has a bank credit agreement with two Swiss banks. Borrowings under the credit agreement bear interest at the bank’s prime rate plus 1.0%. The interest rate was 4.5% at March 31, 2002. We also are eligible to borrow fixed term loans at LIBOR rate plus 2.5% with repayment terms extending beyond one month from the date of funding. Borrowings under the credit agreement are secured by the assets of Maxwell Europe and there are no loan covenants. As of March 31, 2003, there was $0.3 million outstanding under the credit agreement, $0.3 million assigned to letters of guarantee and an available borrowing balance of $2.9 million.

In February 2001, we entered into a Loan and Security Agreement with Comerica Bank-California. The Loan and Security Agreement, as amended, consists of a term loan secured by a deed of trust as well as certain other collateral. The term loan bears interest, at our option, at the bank’s reference rate plus .5%, or cost of funds plus 2.25%. The interest rate was 4.75% at March 31, 2003. The principal is amortized monthly over 20 years with the balance due December 31, 2004. We may prepay the term loan at any time. We currently have an outstanding principal balance of $2.8 million.

The Loan and Security Agreement, as amended, contains covenants restricting our ability to, among other things:

• Sell or dispose of any part of our business, other than sales in the ordinary course of business, where sales proceeds exceed $2 million.

• Engage in any business other than the businesses currently engaged in.

• Merge or consolidate or acquire any other businesses unless we use our own equity and meet the financial covenants on a combined pro-forma basis.

• Incur any other debt except for up to $5 million incurred by foreign subsidiaries and up to $2 million of other debt.

• Make any investments except investments in certain marketable debt securities guaranteed by the United States or any federal or state agency, certain commercial paper, certificates of deposit and bank money market accounts, investments in foreign subsidiaries not to exceed $2 million and up to $2 million of other investments.

• Pay dividends.

• Incur liens except for liens securing amounts under the Loan and Security Agreement.

The Loan and Security Agreement, as amended, also requires us to maintain a minimum tangible net worth of $24 million.

As of the filing date of this Form 10-Q we are in compliance with all covenants.

Net Liabilities of Discontinued Operations

PurePulse, which is classified as discontinued operations, has minority equity investors. As of March 31 2003, minority investors owned approximately 18% of the outstanding stock of PurePulse with an accounting basis of $1.3 million. The remaining liability is comprised mainly of a certain lease obligation of the Government Systems Division.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which requires the Company to make estimates and assumptions. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity and, as such, management assumptions and conclusions in these areas may significantly impact the results of operations of the Company.

Revenue Recognition

For the current year, substantially all of our revenue is derived from the sale of manufactured products directly to customers. In general, revenue is recognized at the time the product is shipped unless specific terms require otherwise. In general, we do not offer discounts and there is no right of return. However in prior years certain continuing and discontinued segments recorded revenue from both long-term and short-term fixed price contracts and cost plus contracts with the U.S. Government directly or through a prime contractor. Those revenues, including estimated profits, were recognized as costs were incurred and included provisions for any anticipated losses. These contracts are subject to rate audits and other audits, which could result in additional losses in excess of estimated provisions.

Accounts Receivable

We establish and maintain customer credit limits based on credit checks, analyses of credit-worthiness and payment history. Accounts receivable consist primarily of amounts due to us from our normal business activities. We maintain an allowance for doubtful accounts to reflect the expected bad debts based on past collection history

and specific risks identified in the portfolio. It is possible that changes in allowance may be required due to changing market conditions, or that judgments as to ultimate realization may be incorrect.

Excess and Obsolete Inventory

We value inventories at the lower of cost or market. In assessing the ultimate realization of inventories, we make judgments as to future demand requirements and compare that with current and committed inventory levels. The markets for the Company’s products are extremely competitive and are characterized by rapid technological change, new product development, product obsolescence and evolving industry standards. In addition price competition is intense and significant price erosion generally occurs over the life of a product. We have recorded significant charges for reserves in recent periods due to changes in market conditions. It is possible that changes in reserves may be required due to changing market conditions, or that judgments as to ultimate realization may be incorrect.

Assets Held for Sale and Remaining Lease Obligations

The building formerly occupied by I-Bus/Phoenix, Inc., which is classified as held for sale, is carried at historical cost. The Company believes that, based on analysis prepared by the listing agent, the fair value is in excess of the carrying value. Changes in market conditions or other factors may ultimately result in realizing less than the carrying value.

Also, the Company has estimated the liability associated with a certain lease obligation recorded in Discontinued Operations (see discussion of Discontinued Operations). We revised the estimate from $0.4 million to $1.1 million during the first quarter of 2003. The total remaining obligation, which terminates in April 2006, is approximately $1.5 million. There can be no guarantee that we will be able to conclude this lease obligation for the amount that we have accrued.

Loss in the Sale of the I-Bus Computing Systems Business

The Company fully reserved for the $7 million note received in exchange for the I-Bus Computing Systems business due to the uncertainty as to its collectability. Future collections would result in recognizing gains.

Long-Lived Assets and Goodwill

Long-lived assets such as property, plant and equipment and other intangible assets are reviewed for impairment whenever events and changes in business circumstances indicate the carrying value of the long-lived asset may not be recoverable. If the Company determines that the carrying value of the long-lived asset may not be recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Management believes that the estimates of fair value are reasonable; however changes in business circumstances or estimates of cash flows and fair value could materially impact reported results.

In assessing the recoverability of goodwill, which is completed annually, we make assumptions regarding future cash flows and other factors to determine the fair value. In addition, we periodically have independent appraisals of the business segments performed and compare the fair value to the carrying value. If these estimates or their related assumptions change in the future, we may be required to record impairment charges. Goodwill associated with the I-Bus Computing Systems was written off in conjunction with the disposition of that business. The remaining goodwill is mainly attributable to the acquisition of Montena Components, which was completed in July 2002. Our analysis, which was completed early in the fourth quarter of 2002, was based on the determination that circumstances since the recently completed acquisition of Montena had not materially changed and the Company’s fair value at that date was significantly in excess of the carrying value of its assets including goodwill.

Valuation Allowance for Deferred Tax Assets

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefit, or that future deductibility is uncertain. In general,

companies that have had a recent history of operating losses are faced with a difficult burden of proof on their ability to generate sufficient future income within the next two years in order to realize the benefit of the deferred tax assets. In 2001, the Company determined that it was appropriate to record a valuation allowance, which continued in 2002 and 2003 against its deferred tax assets based on its recent history of losses. The deferred tax assets are still available for the Company to use in the future to offset taxable income, which would result in the recognition of a tax benefit and a reduction to the Company’s effective tax rate.

Inflation and Changes in Prices

Generally, we have been able to increase prices to offset inflation-related cost increases in our continuing operations.

Forward-Looking Statements

To the extent that the above discussion goes beyond historical information and indicates results or developments which we plan or expect to achieve, these forward-looking statements are identified by the use of terms such as “expected,” “anticipates,” “believes,” plans and the like. Readers are cautioned that such future results are uncertain and could be affected by a variety of factors that could cause actual results to differ from those expected, and such differences could be material.

Some of the risks and uncertainties that could cause the forward-looking statements to be inaccurate are summarized below:

• Further decline in the domestic and global economy that can delay the development and introduction by our customers’ end products that incorporate our components and systems.

• Success in the introduction and marketing of new products into existing and new markets.

• Ability to manufacture existing and new products in volumes demanded by our customers and at competitive prices with adequate gross margins.

• Market success of the products offered by the Company’s customers into which our products are incorporated.

• Ability in growing markets to grow the Company’s market share relative to its competitors.

• Success in meeting cost reduction goals in the restructuring and reorganizing of our businesses.

• Ability to successfully integrate our businesses with operations of acquired businesses.

• Ability to finance the growth of businesses with internal resources or through outside financing at reasonable rates.

We undertake no obligation to revise these forward-looking statements that may be made to reflect future events or circumstances. You are referred to the “Risk Factors” section in Item 1 of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 for a more detailed discussion of certain of those factors.

New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146). This statement supercedes Emerging Issues Task Force (EITF) issue No. 94-3 “Liabilities Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for cost associated with an exit or disposal activity be recognized at the date an entity commits to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS No. 146 is effective for any exit and disposal activities initiated after December 31, 2002.

. In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires certain disclosures about each of the entity’s guarantees. The Company will apply the recognition provisions of FIN 45 to any guarantees issued after December 31, 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have not entered into or invested in any instruments that are subject to market risk, except as follows:

We face exposure to financial market risks, including adverse movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time and could have a material adverse impact on our financial results.

Our primary foreign currency exposure is related to our subsidiary in Switzerland. Maxwell, SA has Euro and local currency (Swiss Franc) revenue and local currency operating expenses. Changes in these currency exchange rates impact the U.S. dollar amount of revenue and expenses. We do not hedge our currency exposures.

At March 31, 2003, we had $2.8 million outstanding related to variable rate U.S dollar denominated-term debt. The carrying value of these short-term borrowings approximates fair value due to the short maturities of these instruments. Assuming a hypothetical 10% adverse change in the interest rate, annual interest expense on our short-term borrowings, if the amount outstanding remained unchanged, would increase by approximately $0.3 million.

We invest excess cash in debt instruments of the U.S. Government and its agencies, high-quality corporate issuers and money market accounts. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. Current policies do not allow the use of interest rate derivative instruments to manage exposure to interest rate changes. A third party manages approximately $5.7 million of the investment portfolio under guidelines approved by the Company’s Board of Directors. The balance of our cash is invested in money market accounts with banks.

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, we completed an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-14 of the Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective with respect to timely communicating to them all material information required to be disclosed in this report as it related to the Company and its subsidiaries.

There have been no significant changes in our internal controls or in other factors that could significantly affect the internal controls subsequent to the date this evaluation was completed.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

The Registrant’s 2003 Annual Meeting of Shareholders was held on May 8, 2003. At the meeting, Richard D. Balanson and José Cortes were elected as Class I directors for a term expiring at the 2006 Annual Meeting of Shareholders. Directors Mark Rossi and Jean Lavigne continue to serve as Class II directors with terms expiring at the 2004 Annual Meetings of Shareholders and Carl Eibl and Robert Guyett will continue to serve as class III directors with terms expiring at the 2005 Annual Meeting of Shareholders.

In addition, the Registrant’s shareholders authorized the issuance of up to 500,000 shares of the Company’s Common Stock to Montena, SA, in accordance with the provisions of an amendment to the Purchase and Barter Agreement through which the Company acquired all the outstanding shares of capital stock of Montena Components Ltd.

The following numbers of votes were cast “for” and to “withhold authority to vote for” the election of Richard D. Balanson, elected as Class I director at the meeting:

For:

10,222,737

Withhold Authority:

2,245,767

The following numbers of votes were cast “for” and to “withhold authority to vote for” the election of José Cortes, elected as Class I director at the meeting:

For:

10,972,726

Withhold Authority:

1,495,778

The vote on authorization of issuance of up to 500,000 shares of the Company’s Common Stock to Montena, SA:

For:

8,475,932

Against:

1,267,642

Abstain:

40,739

Broker non-vote: 2,684,191

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.4	Bylaws of the Registrant as amended to date.
10.45	Amendment Number Six to the Registrant’s 1995 Stock Option Plan
10.46	Services Agreement, dated April 4, 2003, between the Registrant and Carlton J. Eibl.
10.47	Form of Director Indemnity Agreement.
(99)	Certifications

(a) Certification by Chief Executive Officer pursuant to 18 U.S.C.ss.1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Certification by Chief Financial Officer pursuant to 18 U.S.C.ss.1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) No reports on Form 8-K were filed during the quarter.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		MAXWELL TECHNOLOGIES, INC.


May 14, 2003		/s/ RICHARD D. BALANSON
Date		Richard D. Balanson, Chief Executive Officer


May 14, 2003		/s/ JAMES A. BAUMKER
Date		James A. Baumker, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

CERTIFICATIONS

I, Richard D. Balanson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Maxwell Technologies, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

May 14, 2003		/s/ RICHARD D. BALANSON
Date		Signature
		Chief Executive Officer
		(Principal Executive Officer)

		Title

CERTIFICATIONS

I, James A. Baumker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Maxwell Technologies, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

May 14, 2003		/s/ JAMES A. BAUMKER
Date		Signature
		Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

		Title

EX-3.4 3 j1027_ex3d4.htm EX-3.4

EXHIBIT 3.4

BYLAWS
OF
MAXWELL TECHNOLOGIES, INC.
(A Delaware Corporation)

ARTICLE I

Offices

Section 1.01. REGISTERED OFFICE. The registered office of Maxwell Technologies, Inc. (the “Corporation”) in the State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, and the name of the registered agent at that address shall be The Corporation Trust Company.

Section 1.02. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of the Corporation shall be located at such place within or outside of the State of Delaware as the Board of Directors of the Corporation (“Board of Directors”) from time to time shall designate.

Section 1.03. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE II

Meetings of Stockholders

Section 2.01. ANNUAL MEETINGS. The annual meeting of stockholders of the Corporation shall be held on the last Wednesday of November at 11:00 a.m. or on such other date and at such other time as the Board of Directors shall determine. At each annual meeting of stockholders, directors shall be elected in accordance with the provisions of Section 3.03 hereof and any other proper business may be transacted.

Section 2.02. SPECIAL MEETINGS. Special meetings of stockholders for any purpose or purposes may be called at any time by a majority of the Board of Directors, by the Chairman of the Board, or by the President. Special meetings may not be called by any other person or persons. Each special meeting shall be held at such date and time as is requested by the person or persons calling the meeting, within the limits fixed by law.

Section 2.03. PLACE OF MEETINGS. Each annual or special meeting of stockholders shall be held at such location as may be determined by the Board of Directors or, if no such determination is made, at such place as may be determined by the Chairman of the Board. If no location is so determined, any annual or special meeting shall be held at the principal executive office of the Corporation.

Section 2.04. NOTICE OF MEETINGS. Written notice of each annual or special meeting of stockholders stating the date and time when, and the place where, it is to be held shall be

delivered either personally or by mail to stockholders entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. The purpose or purposes for which the meeting is called may, in the case of an annual meeting, and shall, in the case of special meeting, also be stated. If mailed, such notice shall be directed to a stockholder at his address as it shall appear on the stock books of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case such notice shall be mailed to the address designated in such request.

Section 2.05. CONDUCT OF MEETINGS. All annual and special meetings of stockholders shall be conducted in accordance with such rules and procedures as the Board of Directors may determine subject to the requirements of applicable law and, as to matters not governed by such rules and procedures, as the chairman of such meetings shall determine. The chairman of any annual or special meeting of stockholders shall be the Chairman of the Board. The Secretary, or in the absence of the Secretary, a person designated by the Chairman of the Board, shall act as secretary of the meeting.

Section 2.06. QUORUM. At any meeting of stockholders, the presence, in person or by proxy, of the holders of record of a majority of shares then issued and outstanding and entitled to vote at the meeting shall constitute a quorum for the transaction of business; provided, however, that this Section 2.06 shall not affect any different requirement which may exist under statute, pursuant to the rights of any authorized class or series of stock, or under the Certificate of Incorporation of the Corporation (the “Certificate”) for the vote necessary for the adoption of any measure governed thereby. In the absence of a quorum, the stockholders present in person or by proxy, by majority vote and without further notice, may adjourn the meeting from time to time until a quorum is attained. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 2.07. VOTES REQUIRED. Unless otherwise provided by statute, by the rights of any authorized class or series of stock or by the Certificate, at a duly called meeting of stockholders for the election of directors at which a quorum is present (a) a plurality of the votes cast shall be sufficient to elect directors, and (b) a majority of the votes cast shall be sufficient to take or authorize action upon any other matter.

Section 2.08. PROXIES. A stockholder may vote the shares owned of record by him either in person or by proxy executed in writing (which shall include writings sent by telex, telegraph, cable or facsimile transmission) by the stockholder himself or by his duly authorized attorney-in-fact. No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be in writing, subscribed by the stockholder or his duly authorized attorney-in-fact, and dated, but it need not be sealed, witnessed or acknowledged.

Section 2.09. STOCKHOLDER ACTION. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual meeting or special meeting of stockholders of the Corporation, unless such action requiring or permitting stockholder approval is approved by a majority of the Disinterested Directors (as defined in the Certificate), in which case such action may be authorized or taken by the written consent of the holders of outstanding shares of stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting of stockholders at which all

shares entitled to vote thereon were present and voted, provided all other requirements of applicable law and the Certificate have been satisfied.

Section 2.10. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare and make (or cause to be prepared and made), at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of, and the number of shares registered in the name of, each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any stockholder who is present.

Section 2.11. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the Board of Directors may appoint Inspectors of Election to act at such meeting or at any adjournment or adjournments thereof. If such Inspectors are not so appointed or fail or refuse to act, the chairman of any such meeting may (and, upon the demand of any stockholder or stockholder’s proxy, shall) make such an appointment.

The number of Inspectors of Election shall be one (1) or three (3). If there are three (3) Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent the decision, act or certificate of all. No such Inspector need be a stockholder of the Corporation.

The Inspectors of Election shall determine the number of shares outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; they shall receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close and determine the result; and finally, they shall do such acts as may be proper to conduct the election to vote with fairness to all stockholders. On request, the Inspectors shall make a report in writing to the secretary of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such secretary a certificate of any fact found by them.

ARTICLE III

Directors

Section 3.01. POWERS. The business and affairs of the Corporation shall be managed by and be under the direction of the Board of Directors. The Board of Directors shall exercise all the powers of the Corporation, except those that are conferred upon or reserved to the stockholders by statute, the Certificate of these Bylaws.

Section 3.02. NUMBER. The number of directors shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three (3). The first Board of Directors and subsequent Boards of Directors shall consist of three (3) directors until changed as herein provided.

Section 3.03. ELECTION AND TERM OF OFFICE OF DIRECTORS. Except as provided in Section 3.06 hereof, directors shall be elected by the stockholders of the Corporation. The Board of Directors shall be and is divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors, with the term of office of the directors of one class expiring each year. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected, provided, however, that the directors elected to Class I at the 1986 annual meeting of stockholders shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1986, and the directors elected to Class II at the 1986 annual meeting of stockholders shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1987, and the directors elected to Class III at the 1986 annual meeting of stockholders shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1988.

Notwithstanding the foregoing provisions of this Section 3.03, each director shall serve until his successor is elected and qualified or until his death, resignation or removal and no decrease in the authorized number of directors shall shorten the term of any incumbent director.

Section 3.04. ELECTION OF CHAIRMAN OF THE BOARD. At the organizational meeting immediately following the annual meeting of stockholders, the directors shall elect a Chairman of the Board from among the directors who shall hold office until the corresponding meeting of the Board of Directors in the next year and until his successor shall have been elected or until his earlier resignation or removal. Any vacancy in such office may be filled for the unexpired portion of the term in the same manner by the Board of Directors at any regular or special meeting.

Section 3.05. VACANCIES AND ADDITIONAL DIRECTORSHIPS. Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 3.06. REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors, except that a regular meeting shall be held immediately following each annual meeting of shareholders for the purpose of organization, election of officers and the transaction of other business. A notice of each regular meeting shall not be required.

Special meetings of the Board of Directors shall be held upon call by or at the direction of the Chairman of the Board, the President, any Vice President, the Secretary or any two directors. Except as otherwise required by law, notice of each special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at such place by telex, telegram, cable, facsimile transmission or telephoned or delivered to him personally, not later than the day

before the day on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purpose or purposes thereof, unless otherwise required by law, the Certificate of these Bylaws.

Notice of any meeting need not be given to any director who shall attend such meeting in person or who shall waive notice thereof, before or after such meeting, in a signed writing.

Section 3.07. QUORUM. At all meetings of the Board of Directors, a majority of the fixed number of directors shall constitute a quorum for the transaction of business. In the absence of a quorum, the directors present, by majority vote and without notice other than by announcement, may adjourn the meeting from time to time until a quorum shall be present. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 3.08. VOTES REQUIRED. Except as otherwise provided by applicable law or by the Certificate, the vote of a majority of the directors present at a meeting duly held at which a quorum is present shall be sufficient to pass any measure.

Section 3.09. PLACE AND CONDUCT OF MEETINGS. Each regular meeting and special meeting of the Board of Directors shall be held at a location determined as follows: The Board of Directors may designate any place, within or without the State of Delaware, for the holding of any meeting. If no such designation is made: (i) any meeting called by a majority of the directors shall be held at such location, within the county of the Corporation’s principal executive office, as the directors calling the meeting shall designate; and (ii) any other meeting shall be held at such location, within the county of the Corporation’s principal executive office, as the Chairman of the Board may designate or, in the absence of such designation, at the Corporation’s principal executive office. Subject to the requirements of applicable law, all regular and special meetings of the Board of Directors shall be conducted in accordance with such rules and procedures as the Board of Directors may approve and, as to matters not governed by such rules and procedures, as the chairman of such meeting shall determine. The chairman of any regular or special meeting shall be the Chairman of the Board, or in his absence a person designated by the Board of Directors. The Secretary, or in the absence of the Secretary a person designated by the chairman of the meeting, shall act as secretary of the meeting.

Section 3.10. FEES AND COMPENSATION. Directors shall be paid such compensation as may be fixed from time to time by resolutions of the Board of Directors (a) for their usual and contemplated services as directors, (b) for their services as members of committees appointed by the Board of Directors, including attendance at committee meetings as well as services which may be required when committee members must consult with management staff, and (c) for extraordinary services as directors or as members of committees appointed by the Board of Directors, over and above those services for which compensation is fixed pursuant to items (a) and (b) in this Section 3.10. Compensation may be in the form of an annual retainer fee or a fee for attendance at meetings, or both, or in such other form or on such basis as the resolutions of the Board of Directors shall fix. Directors shall be reimbursed for all reasonable expenses incurred by them in attending meetings of the Board of Directors and committees appointed by the Board of Directors and in performing compensable extraordinary services. Nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity, such as an officer, agent, employee, consultant or otherwise, and receiving compensation therefor.

Section 3.11. COMMITTEES OF THE BOARD OF DIRECTORS. Subject to the requirements of applicable law, the Board of Directors may from time to time establish committees, including an executive committee and other standing or special committees, which shall have such duties and powers as are authorized by these Bylaws or by the Board of Directors. Committee members, and the chairman of each committee, shall be appointed by the Board of Directors. The Chairman of the Board, in conjunction with the several committee chairman, shall make recommendations to the Board of Directors for its final action concerning members to be appointed to the several committees of the Board of Directors. Any member of any committee may be removed at any time with or without cause by the Board of Directors. Vacancies which occur on any committee shall be filled by a resolution of the Board of Directors. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, so long as a quorum is present, may continue to act until such vacancy is filled by the Board of Directors. The Board of Directors may, by resolution, at any time deemed desirable, discontinue any standing or special committee.

Section 3.12. MEETING OF COMMITTEES. Each committee of the Board of Directors shall fix its own rules of procedure consistent with the provisions of applicable law and of any resolutions of the Board of Directors governing such committee. Each committee shall meet as provided by such rules or such resolution of the Board of Directors, and shall also meet at the call of its chairman of any two (2) members of such committee. Unless otherwise provided by such rules or by such resolution, the provisions of these Bylaws under Article III entitled “Directors” relating to the place of holding meetings and the notice required for meetings of the Board of Directors shall govern the place of holding meetings and notice of meetings for committees of the Board of Directors. A majority of the members of each committee shall constitute a quorum thereof. In the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present and the meeting may be held as adjourned without further notice of waiver. Except in cases where it is otherwise provided by the rules of such committee or by a resolution of the Board of Directors, the vote of a majority of the members present at a duly constituted meeting at which a quorum is present shall be sufficient to pass any measure by the committee.

Section 3.13. REMOVAL. Any director may be removed from office only as provided in Article Tenth of the Certificate.

ARTICLE IV
(As Amended on the 22nd day of January 1996)

Officers

Section 4.01. DESIGNATION, ELECTION AND TERM OF OFFICE. The Corporation shall have a Chairman of the Board, a Chief Executive Officer, a President, and such Vice Presidents as the Board of Directors deems appropriate, a Secretary and a Treasurer. Any number of offices may be held by the same person. These officers shall be elected annually by the Board of Directors at an organizational meeting immediately following the annual meeting of stockholders, and each officer shall serve at the pleasure of the Board of Directors, to hold office until the corresponding meeting of the Board of Directors in the next year, and until his successor shall have been elected and qualified, or until his earlier resignation, death or removal.

Any vacancy in any of the above offices may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.

Section 4.02a. CHAIRMAN OF THE BOARD. The Chairman of the Board shall have the general powers and duties of management usually vested in the office of the Chairman of the Board and shall, in addition, be the Chief Executive Officer of the Corporation with all the powers and duties vested in the office of the CEO as prescribed in Section 4.02b of this Article IV unless the Board of Directors elects another individual to fill such office. He shall, if present, preside at all meetings of the Board of Directors and at all meetings of the stockholders and he shall be ex-officio a member of all standing committees, if any, of the Board of Directors. The Chairman of the Board shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. Subject to such limitations as may be imposed by the Board of Directors, any powers or duties vested in the Chairman of the Board may be delegated by him to such subordinates as he may choose.

Section 4.02b. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall provide senior level executive leadership to the Corporation. He shall have the general powers and duties of management usually vested in the office of the Chief Executive of a corporation, and shall have in addition such other powers and duties as may be prescribed by the Chairman of the Board or these Bylaws. In the absence of the Chairman of the Board, he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. He shall be ex-officio a member of all standing committees, if any, of the Board of Directors. Subject to such limitations as may be imposed by the Chairman, any powers or duties vested in the Chief Executive Officer may be delegated by him to such subordinates as he may choose. If there is no President, the CEO shall, in addition, be the President of the Corporation and shall have the powers and duties vested in the office of the President, as prescribed in Section 4.03 of this Article IV.

Section 4.03. PRESIDENT. Subject to the control of the Chief Executive Officer and to the general oversight powers of the Chairman, the President shall provide general supervision, direction and control of the business and operations of the Corporation. He shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have, in addition, such other powers and duties as may be prescribed by the CEO. Subject to such limitations as may be imposed by the CEO, any powers and duties vested in the President may be delegated by him to such subordinates as he may choose.

Section 4.04. VICE PRESIDENTS. Vice Presidents and Executive Vice Presidents of the Corporation who are elected by the Board of Directors shall perform such duties as may be assigned to them from time to time by the Board of Directors, Chairman of the Board, President, or by these Bylaws.

Section 4.05. SECRETARY.

(a) The Secretary shall keep or cause to be kept, at the principal office or such other place as the Board of Directors may order, a book of minutes of all meetings of Directors and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at Directors meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.

(b) The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation’s transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

(c) The Secretary shall give, or cause to be given notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or Bylaw to be given, and he shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.

Section 4.06. TREASURER.

(a) The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of accounts shall at all reasonable times be open to inspection by any director.

(b) The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.

Section 4.07. ASSISTANT OFFICERS. The Board of Directors may appoint or may confer upon any officer or officers of the Corporation the power to appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine. If an assistant officer to any officer shall be appointed, such assistant officer may exercise any of the powers of his superior officer, as provided in these Bylaws or as authorized by the Board of Directors, and shall perform such other duties as are imposed upon him by these Bylaws or the Board of Directors.

Section 4.08. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board, to the President, or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein unless otherwise determined by the Board of Directors. The acceptance of a resignation by the Corporation shall not be necessary to make it effective.

Section 4.09. REMOVAL. Any officer of the Corporation may be removed, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Any assistant officer of the Corporation may be removed, with or without cause, by the Chairman of the Board, the President or by the Board of Directors.

ARTICLE V

Indemnification of Directors, Officers,
Employees and Other Corporate Agents

Section 5.01. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor of the Corporation or of another enterprise at the request of such predecessor corporation, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 5.02 of this Article V, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. This Article shall create a right of indemnification for each such indemnifiable party whether or not the proceeding to which the indemnification relates arose in whole or in part prior to adoption of this Article (or the adoption of the comparable provisions of the Bylaws of the Corporation’s predecessor corporation).

Section 5.02. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 5.01 is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 5.03. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 5.04. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

ARTICLE VI

Stock

Section 6.01. CERTIFICATES. Except as otherwise provided by law, each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number and class (and series, if appropriate) of shares of stock owned by him in the Corporation. Each certificate shall be signed in the name of the Corporation by the Chairman of the Board or the President or a Vice President together with the Secretary, or an Assistant Secretary, or the Treasurer or an Assistant Treasurer. Any or all of the signatures on any certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Section 6.01. TRANSFER OF SHARES. Shares of stock shall be transferable on the books of the Corporation only by the holder thereof, in person or by his duly authorized attorney, upon the surrender of the certificate representing the shares to be transferred, properly endorsed, to the

Corporation’s registrar if the Corporation has a registrar. The Board of Directors shall have power and authority to make such other rules and regulations concerning the issue, transfer and registration of certificates of the Corporation’s stock as it may deem expedient.

Section 6.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board of Directors or the Secretary may, from time to time, define. No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by a registrar, if the Corporation has a registrar. The duties of transfer agent and registrar may be combined.

Section 6.04. STOCK LEDGERS. Original or duplicate stock ledgers, containing the names and addresses of the stockholders of the Corporation and the number of shares of each class of stock held by them, shall be kept at the principal executive office of the Corporation or at the office of its transfer agent or registrar.

Section 6.05. RECORD DATES. The Board of Directors shall fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or in order to make a determination of stockholders for any other proper purpose. Such date in any case shall be not more than sixty (60) days, and in case of a meeting of stockholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors.

Section 6.06. NEW CERTIFICATES. In case any certificate of stock is lost, stolen, mutilated or destroyed, the Board of Directors may authorize the issuance of a new certificate in place thereof upon such terms and conditions as it may deem advisable; or the Board of Directors may delegate such power to any officer or officers or agents of the Corporation; but the Board of Directors or such officer or officers or agents, in their discretion, may refuse to issue such a new certificate unless the Corporation is ordered to do so by a court of competent jurisdiction.

ARTICLE VII

Sundry Provisions

Section 7.01. FISCAL YEAR. The fiscal year of the corporation shall end on the 31st day of July of each year.

Section 7.02. SEAL. The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which seal shall be in the charge of the Secretary of the Corporation.

Section 7.03. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares of stock in other corporations or associations, which may from time to time be held by the Corporation, may be represented and voted at any of the stockholders’ meetings thereof by the Chairman of the Board or his designee. The Board of Directors, however, may by resolution appoint some other person or persons to vote such shares, in which case such person or persons shall be entitled to vote such shares upon the production of a certified copy of such resolution.

Section 7.04. AMENDMENTS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of shareholders entitled to exercise a majority of the voting power of the corporation, except as otherwise provided by law or by the Certificate. Subject to the rights of the shareholders as provided in this Section to adopt, amend or repeal bylaws, bylaws may be adopted, amended or repealed by the board of directors. Whenever an amendment or new bylaw is adopted it shall be copied in the original bylaws in the appropriate place. If any bylaw is repealed, the fact of repeal and the date of the meeting at which the repeal was enacted or the date the written consent was effective shall be stated in the original bylaws.

EX-10.45 4 j1027_ex10d45.htm EX-10.45

EXHIBIT 10.45

AMENDMENT NUMBER SIX TO
MAXWELL TECHNOLOGIES, INC.
1995 STOCK OPTION PLAN

The Maxwell Technologies, Inc. 1995 Stock Option Plan (the “Plan”) is hereby amended in the following respects:

1. Section 6(g) of the Option Plan is amended by adding the following sentence to the end of such Sections;

“Notwithstanding anything in this Plan to the contrary, the Option privileges of an Optionee shall not expire by reason of the termination of the Optionee’s employment, and such Options shall continue to become exercisable in accordance with the terms of the Agreement related thereto, if the Optionee continues to serve as a member of the Board or, at the request of the Company, the board of directors of any Subsidiary. Upon the termination of Optionee’s service as a member of the Board or the board of directors of any Subsidiary, such Option privileges shall expire unless exercised by the Optionee within sixty (60) days after such termination.”

2. Effect of Amendments.

This amendment to the Plan shall be effective as of May 8,2003.

	MAXWELL TECHNOLOGIES, INC.


	By:	/s/ Richard Smith
	Richard Smith, Secretary


	Date: May 8, 2003

EX-10.46 5 j1027_ex10d46.htm EX-10.46

EXHIBIT 10.46

MAXWELL TECHNOLOGIES, INC.
SERVICES AGREEMENT

This Services Agreement (the “Agreement”) is made as of this 4th day of April, 2003, by and between MAXWELL TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and CARLTON J. EIBL (“Eibl”).

RECITALS

WHEREAS, Eibl and the Company are parties to an Employment Agreement dated as of November 9, 1999, as amended as of March 31, 2002 (the “Employment Agreement”); and

WHEREAS, the parties wish to terminate the Employment Agreement and provide for Eibl’s continuing relationship with the Company on the terms set forth herein.

AGREEMENT

The parties, intending to be legally bound, agree as follows:

1. Term of Continued Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to continue the employment of Eibl, and Eibl agrees to be employed by the Company, for the period commencing on April 4, 2003 and ending on the first to occur of (i) December 31, 2004 and (ii) the date on which this Agreement is terminated by either the Company or Eibl pursuant to Section 5 hereof (the “Term”).

2. Duties; Other Business Activities.

(a) Eibl shall perform the following duties and render the following services: (i) oversee and assist the strategic development of the Company’s patent estate, (ii) assist with corporate governance issues and public company disclosure and filing obligations, including for filings with the Securities and Exchange Commission (“SEC”), implementation of new SEC and SRO required corporate governance and disclosure procedures, and coordination with the Chief Executive Officer, the Chief Financial Officer and the Board of Directors of the Company (the “Board”) regarding such filings and procedures, and (iii) serve as the Chairman and Chief Executive Officer of PurePulse Technologies, Inc. (“PurePulse”) and oversee and manage the activities of PurePulse, including the ongoing development with licensees, patent estate prosecution, minority shareholders and other efforts to secure the ultimate realization of value for PurePulse shareholders. In addition, Eibl shall perform such additional duties and services as may be requested by the Board or the Chief Executive Officer of the Company, provided that Eibl in his sole discretion agrees to undertake such additional duties and services.

(b) Eibl agrees to perform the duties and render the services referenced in Section 2(a) to the best of his ability, devoting thereto such professional time as Eibl and the Company reasonably and in good faith determine is necessary for Eibl to comply with his

obligations hereunder, provided that Eibl shall not be required to devote more than 40 hours per fiscal quarter in the performance of his obligations hereunder. Eibl shall continue to be entitled to maintain an office, with secretarial support, at the Company’s corporate offices; however Eibl may perform his duties and services hereunder at any location and at times he reasonably chooses. Eibl shall not be required to travel to perform any obligations hereunder without his consent. Eibl and the Company agree that Eibl may engage in any other business or investment activity (including accepting employment or providing consulting services to one or more other business enterprises); provided, however, that Eibl shall not during the Term be engaged in any other business activity, whether or not such business activity is pursued for gain or profit, that is directly competitive with the business of the Company or its subsidiaries on the date hereof. Eibl and the Company agree to work in good faith to coordinate Eibl’s duties and services required hereunder with his personal and other business activities.

3. Compensation. As compensation for the services to be performed under this Agreement:

(a) Aggregate Compensation. Eibl shall receive aggregate compensation of $437,000 (the “Aggregate Compensation”) for his services hereunder during the Term, which shall be payable in equal semi-monthly installments pursuant to the Company’s regular payroll schedule, commencing on the first payroll date after April 4, 2003. Such payments shall be paid in a manner consistent with the Company’s payroll practices, and subject to normal withholding.

(b) Benefits. Eibl shall be entitled to participate in the Company’s insurance, health, life insurance, long term disability and dental and medical programs, as the same may exist from time to time on the terms and conditions applicable to senior officers of the Company. Nothing in this Agreement shall preclude the Company from terminating or amending any employee benefit plan or program from time to time. The Company will reimburse Eibl for the reasonable cost of an annual physical examination, if Eibl elects to have the same.

(d) Expenses. Eibl shall be reimbursed for all travel and other reasonable out-of-pocket expenses actually incurred by him in connection with the performance of his duties hereunder, subject the Company’s expense reimbursement policies as in effect from time to time and to the receipt by the Company of receipts and statements in a form reasonably satisfactory to it.

4. Termination of Employment Agreement.

(a) Termination; Severance. Eibl and the Company agree that the Employment Agreement hereby is terminated on the terms set forth herein and that Eibl shall not be entitled to receive any severance payment thereunder as a result of such termination.

(b) Accrued Vacation. On the date hereof, the Company shall pay Eibl for all accrued and unused vacation time that Eibl accrued under the Employment Agreement prior to the date hereof.

(c) Options. All options granted to Eibl by the Company and outstanding on the date hereof as set forth on Exhibit A attached hereto (the “Options”) shall continue to vest in accordance with the vesting terms in the option agreements governing such Options so long as Eibl continues to serve as a member of the Board or is otherwise eligible to receive grants of options under the Company’s stock option plans. Such Options include the options that are subject to the option exchange program implemented in November 2002 pursuant to which substitute options will be granted in late May 2003 with a strike price equal to the then prevailing market price of the Company’s Common Stock. This Section 4(c) will survive any termination of this Agreement.

5. Termination.

(a) Termination by the Company for Cause. Notwithstanding anything to the contrary herein contained, the Company may terminate immediately the employment of Eibl without notice and without pay in lieu of notice:

(i) if Eibl commits an act of theft, fraud or material dishonesty or misconduct involving the property or affairs of the Company or the carrying out of Eibl’s duties; or

(ii) if Eibl commits a material breach or material non-observance of any of the terms or conditions of this Agreement provided that Eibl is given written notice of any such breach or non-observance and fails to remedy the same within 15 days of receipt of such notice; or

(iii) if Eibl is convicted of a felony; or

(iv) if Eibl or any member of his family makes any personal profit arising out of or in connection with a transaction to which the Company or any of its subsidiaries is a party or with which it is associated without making disclosure to and obtaining prior written consent of the Company.

Upon the termination of Eibl’s employment pursuant to this Section 5(a), this Agreement and the employment of Eibl hereunder shall be wholly terminated. Upon any such termination, Eibl shall have no claim against the Company in respect of his employment for damages or otherwise except in respect of payment of a portion of the Aggregate Compensation earned, due and owing to the date of termination.

(b) Termination by the Company Without Cause. Notwithstanding anything herein to the contrary, the Company may terminate Eibl’s employment hereunder at any time, for any reason or no reason, on not less than 30 days’ prior written notice. In the event of termination pursuant to this Section 5(b), Eibl will be paid in cash the entire remaining unpaid portion of his Aggregate Compensation on the date of termination.

(c) Termination by Eibl. Eibl may terminate his employment hereunder at any time, for any reason, upon the giving of not less than 90 days’ prior written notice to the Company. In the event of termination by Eibl under this Section 5(c), Eibl shall be entitled to receive only the portion of the Aggregate Compensation through the effective date of

termination. Upon the termination of Eibl’s employment pursuant to this Section 5(c), this Agreement and the employment of Eibl hereunder shall be wholly terminated. Upon any such termination, Eibl shall have no claim against the Company in respect of his employment for damages or otherwise except in respect of payment of the portion of the Aggregate Compensation earned, through the date of termination.

(d) Termination by the Company Due to Death or Disability. The employment of Eibl shall, at the option of the Company, terminate immediately in the event of his death or permanent disability, in which case notice in writing from the Company shall be sent to Eibl or his legal representative. In the event of termination by the Company due to death, Eibl’s estate will continue to be paid the remaining portion of the Aggregate Compensation in installments through December 31, 2004 as if the termination of the employment of Eibl pursuant to this Section 5(d) had not occurred. In the event of termination by the Company due to permanent disability, the Company shall take all reasonable efforts so that Eibl (i) receives payments equal to the remaining portion of the Aggregate Compensation through December 31, 2004, as if the termination of the employment of Eibl pursuant to this Section 5(d) had not occurred (whether through his receipt of any disability benefit payments to which he may be entitled under any disability insurance programs maintained by the Company in which he is a participant or through his receipt of full or partial payments of such amounts pursuant to this Agreement), and (ii) receives disability benefit coverage under such disability insurance program after the expiration of the Term of this Agreement. Except to the extent provided in the preceding sentence, Eibl shall be entitled to no additional compensation under this Agreement following the date of termination under this Section 5(d), other than the remaining Aggregate Compensation earned through the date of termination. For purposes of this Agreement “permanent disability” shall mean an illness, disease, mental or physical disability or other causes beyond Eibl’s control which makes Eibl incapable of discharging his duties or obligations hereunder, or causes Eibl to fail in the performance of his duties hereunder, for six consecutive months, as determined in good faith by the Board based on a report of a physician selected in good faith by the Board.

(e) Payments. Any amounts payable to Eibl under this Section 5 shall be paid on the date the payment obligation accrues, and shall be subject to normal withholding. Notwithstanding anything to the contrary hereunder, Section 4(c) above will survive the termination of this Agreement.

(f) Exclusive Rights. In connection with any termination under Section 5(b), Eibl shall have no claim against the Company in respect of his employment for damages or otherwise except in respect of the payments and other provisions specified in such sections.

(g) Cooperation. Upon any termination of employment by the Company or by Eibl hereunder, Eibl shall cooperate with the Company, as reasonably requested by the Company, to effect a transition of Eibl’s responsibilities and to ensure that the Company is aware of all matters being handled by Eibl.

6. Resolution of Disputes. The parties recognize that claims, controversies and disputes may arise out of this Agreement with respect to Eibl’s employment, termination of employment, or other terms of this Agreement or based on common law or statute, either during

the existence of the employment relationship or afterwards. The parties agree that should any such claim, controversy or dispute arise, the parties will use their reasonable best efforts to resolve such dispute informally, between them. In the event that any such claim, controversy or dispute between the Company and Eibl cannot be resolved within thirty (30) days after either party first gives notice in writing that any such claim, controversy or dispute exists, either party may then refer the matter to arbitration before JAMS/ENDISPUTE pursuant to its rules for resolution of employment disputes.

(a) The parties hereby agree that referral to arbitration shall be the sole recourse of either party under this Agreement with respect to any such claim, controversy or dispute and that the decision of the arbitrator shall be binding on the parties in accordance with applicable law; provided, however, that nothing in this Section 6 shall be construed as precluding either party from bringing an action for injunctive relief or other equitable relief. The parties shall keep confidential the existence of each such the claim, controversy or dispute from third parties (other than arbitrator), and the determination thereof, unless otherwise required by law. Except as provided in the following sentence, such decision rendered by the arbitrator shall be final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. In rendering his or her decision, the arbitrator shall be bound to follow California or Federal law, as applicable, in the same manner as would a court of law. Any claim that the arbitrator made a mistake or error in determining or applying the appropriate law shall be subject to judicial review.

(b) The parties further agree that the party prevailing in the arbitration shall be entitled to its reasonable attorney’s fees and that the arbitration itself shall take place within the County of San Diego, California, and that the internal laws of the State of California shall apply.

7. General Obligations of Eibl.

(a) Eibl agrees and acknowledges that he owes a duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Company, to not knowingly become involved in a conflict of interest and to not knowingly do any act or knowingly make any statement, oral or written, which would injure the Company’s business, its interest or its reputation unless required to do so in any legal proceeding by a competent court with proper jurisdiction.

(b) Eibl agrees to comply at all times with all applicable policies, rules and regulations of the Company, including, without limitation, the Company’s policy regarding trading in the Common Stock of the Company, as is in effect from time to time.

8. No Solicitation. Eibl agrees that in the event he is no longer employed by the Company, for any reason, he shall not hire, solicit or otherwise cause to be solicited for employment elsewhere, either directly or indirectly, for a period of one year from his termination of employment, any employee, officer or director of the Company or any individual who chooses not to join the Company, provided that Eibl participated actively in the recruiting of such individual.

9. No Sales of Stock. Eibl agrees that until December 31, 2004 he will not offer, sell or contract to sell any shares of Common Stock of the Company without the prior written consent of the Company.

10. Entire Agreement. This Agreement constitutes the entire Agreement between the parties and contains all agreements between them with the exception of the Company’s stock option plans (and any stock option agreements issued thereunder) the other employee benefit and welfare programs maintained by the Company, and the Invention and Secrecy Agreement dated as of November 9, 1999 and signed by Eibl, which are supplementary to this Agreement and are each deemed to be incorporated herein by reference. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied in this Agreement, and that no agreement, statement or promise not contained in this Agreement shall be valid or binding. Except for the other agreements, plans and programs referred to in this Section 10, this Agreement also supersedes any and all other agreements and contracts whether verbal or in writing relating to the subject matter hereof.

11. Amendment. Except as otherwise specifically provided herein, the terms and conditions of this Agreement may be amended at any time by mutual agreement of the parties; provided that before any amendment shall be valid or effective, it shall have been reduced to writing and signed by the Chairman of the Compensation Committee of the Board or the Chief Executive Officer (as may be authorized by such Chairman) on behalf of the Company and by Eibl.

12. Invalidity. The invalidity or unenforceability of any particular provision of this Agreement shall not affect its other provisions, and this contract shall be construed in all respects as if such invalid or unenforceable provision has been omitted.

13. Successors and Assigns; Binding Nature. Eibl’s rights and obligations under this Agreement shall not be assignable, transferable or delegable by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, any purchaser of substantially all of the Company’s assets, any successor to the Company or any assignee thereof.

14. Assistance in Litigation. Eibl shall, during and after termination of employment, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become a party. Except where Eibl is a named defendant, Eibl shall be paid a reasonable hourly fee to be mutually agreed upon.

15. Indemnification. The Company shall indemnify Eibl in accordance with its standard indemnification policy for officers and directors of the Company and as required by applicable law.

16. No Duty to Mitigate. Eibl shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other

manner), nor shall any such payment be reduced by any earnings that Eibl may receive from any other source not paid for by the Company.

17. Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California except for Section 7 hereof which shall be governed by, and interpreted and construed in accordance with, the internal laws (without giving effect to choice of law principles) of the jurisdiction in which either of said Sections is being sought to be enforced.

18. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and, if given by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if given by personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified, at the following addresses:

If to Eibl to:

Carlton J. Eibl
1903 El Camino del Teatro
La Jolla, California 92037
Telephone: (858) 551-8237
Fax: (858) 551-8254

If to the Company to:

Maxwell Technologies, Inc.
9244 Balboa Avenue
San Diego, California 92123
Attn: CEO
Telephone: (619) 576-7502
Fax: (619) 277-6754

19. Injunctive Relief. The Company and Eibl agree that a breach of any term of this Agreement by Eibl would cause irreparable damage to the Company and that, in the event of such breach, the Company shall have, in addition to any and all remedies of law, the right to any injunction, specific performance and other equitable relief to prevent or to redress the violation of Eibl’s duties or responsibilities hereunder.

20. Release. If Eibl’s employment hereunder shall terminate under Section 5(b), Eibl agrees, as a condition to his entitlement to receive the amounts specified in such Sections to be due to him, to execute and deliver to the Company a release in the form attached hereto as Exhibit B. Such release shall be delivered by Eibl at the time of termination, but shall become effective only after Eibl has received all payments specified in this Agreement to be due to him from the Company in respect of his termination.

21. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and either of the parties to this Agreement may execute this Agreement by signing any such counterpart.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

“Company”


MAXWELL TECHNOLOGIES, INC.


By:	/s/	Richard D. Balanson
	Name: Richard D. Balanson
	Title: Chief Executive Officer


/s/ Carlton J. Eibl





Carlton J. Eibl

EX-10.47 6 j1027_ex10d47.htm EX-10.47

EXHIBIT 10.47

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of May 8, 2003, is made by and between Maxwell Technologies, Inc., a Delaware corporation (the “Company”), and (the “Indemnitee”).

R E C I T A L S:

A. The Company recognizes that competent and experienced persons are increasingly reluctant to serve as directors of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors.

B. The statutes and judicial decisions regarding the duties of directors are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take.

C. The Company and the Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so substantial (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors.

D. The Company believes that it is unfair for its directors to assume the risk of substantial judgments and other expenses which may occur in cases in which the director received no personal profit and in cases where such person acted in good faith.

E. Section 145 of the General Corporation Law of Delaware (“Section 145”), under which the Company is organized, empowers the Company to indemnify, among others, its directors by agreement and to indemnify persons who serve, at the request of the Company, as the directors of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive.

F. The Board of Directors of the Company has determined that contractual indemnification as set forth herein is not only reasonable and prudent but necessary to promote the best interests of the Company and its stockholders.

G. The Company desires and has requested the Indemnitee to serve or continue to serve as a director of the Company.

H. The Indemnitee only is willing to serve, or to continue to serve, as a director of the Company if the Indemnitee is furnished the indemnity provided for herein by the Company.

A G R E E M E N T :

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:

22. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

• “Agent” of the Company shall mean any person who: (i) is or was a director of the Company; or (ii) is or was serving at the request of, for the convenience of, or to represent the interest of the Company as a director of a Subsidiary of the Company or of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise.

• “Expenses” shall mean all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees, fees of experts, witness fees, travel fees, and all related disbursements, or other out-of-pocket costs of the types customarily incurred in connection with prosecuting, defending or appealing, preparing to prosecute, defend or appeal investigations, being or preparing to be a witness in or otherwise participating in, a Proceeding or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise.

• “Proceeding” shall mean any threatened, pending, or completed action, suit, arbitration, hearing or other proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever.

• “Subsidiary” shall mean any corporation of which more than 50% of the outstanding voting securities are owned directly or indirectly by the Company.

23. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an Agent of the Company for so long as the Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the bylaws of the Company or of any Subsidiary thereof, or until such time as the Indemnitee tenders his resignation in writing or is removed from his or her position in accordance with the bylaws of the Company or otherwise; provided, however, that nothing contained in this Agreement is intended to create any right to continued service with the Company or any other entity in any capacity.

24. Indemnification.

(a) Indemnification in Third Party Proceedings.

(i) Subject to Section 10 hereof, the Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the name of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee is or was an Agent of the Company, or by reason of any act or inaction by him in any such capacity (including, but not limited to, any written statement of the Indemnitee that (A) is required to be, and is, filed with the Securities and Exchange Commission (the “SEC”) regarding the adequacy of the Company’s internal controls or the accuracy of reports or statements filed by the Company with the SEC pursuant to federal laws and/or administrative regulations (each, a “Required Statement”) or (B) is made to another officer or employee of the Company to support a Required Statement),

against any and all Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines (including any excise taxes assessed with respect to any employee benefit plan), penalties and, subject to Section 10(d) hereof, amounts paid in settlement), actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such Proceeding, but only if the Indemnitee, subject to the presumption set forth in Section 3(c) hereof, acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

(ii) The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal Proceeding, that the Indemnitee had reasonable cause to believe that the Indemnitee’s conduct was unlawful.

(b) Indemnification in Derivative Actions. Subject to Section 10 hereof, the Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the name of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an Agent of the Company, or by reason of any act or inaction by the Indemnitee in any such capacity (including, but not limited to, any written statement of the Indemnitee that (i) is a Required Statement or (ii) is made to another officer or employee of the Company to support a Required Statement), against all Expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement, or appeal of such Proceedings, but only if the Indemnitee, subject to the presumption set forth in Section 3(c) hereof, acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company; provided, however, that no indemnification under this subsection (b) shall be made in respect of any claim, issue or matter as to which the Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction, except and only to the extent that any court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.

(c) Conclusive Presumption Regarding Indemnitee Conduct. With respect to Sections 3(a) and 3(b) hereof, the Indemnitee shall be conclusively presumed to have acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal Proceeding, to have had no reasonable cause to believe Indemnitee’s conduct was unlawful, unless a determination is made that the Indemnitee has not acted in accordance with the standards set forth above (i) by the Board of Directors of the Company by a majority vote of a quorum thereof consisting of directors who were not parties to the Proceeding due to which a claim is made under this Agreement, (ii) by the stockholders of the Company by a majority vote of stockholders who were not parties to such a Proceeding, or (iii) in a written opinion of independent legal counsel, selection of whom has been approved by the Indemnitee in writing or by a panel of arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected.

25. Indemnification of Expenses of Successful Party. Notwithstanding any other provisions of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of (a) any Proceeding referred to in Section 3(a) or 3(b) hereof or (b) any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify the Indemnitee (to the maximum extent permitted by law) against all Expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense or appeal of such Proceeding, or any claim, issue or matter therein.

26. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties or, subject to Section 10(d) hereof, amounts paid in settlement) actually and reasonably incurred by him in the investigation, defense, settlement or appeal of a Proceeding but is not entitled, however, to indemnification for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.

27. Advancement of Expenses. Subject to Section 10(b) hereof, the Company shall advance all reasonable Expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any Proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an Agent of the Company. The Indemnitee hereby undertakes to repay such advanced Expenses only if, and to the extent that, it shall ultimately be determined by a final judgment or other final adjudication that the Indemnitee is not entitled to be indemnified by the Company as authorized by this Agreement. The advances to be made hereunder shall be paid by the Company to or on behalf of the Indemnitee within 10 days following delivery of a written request therefor by the Indemnitee to the Company.

28. Notice and Other Indemnification Procedures.

(a) Notification of Proceeding. Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of any Proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat thereof.

(b) Indemnification Payments. Any indemnification payment pursuant to Section 3 hereof requested by the Indemnitee shall be made no later than 10 days after receipt of the written request of the Indemnitee, unless a good faith determination is made within said 10-day period in accordance with one of the methods set forth in Section 3(c) hereof that the Indemnitee is not or (subject to final judgment or other final adjudication as provided in Section 10(a) hereof) ultimately will not be entitled to indemnification hereunder.

(c) Application for Enforcement. Notwithstanding a determination under Section 3(c) hereof that the Indemnitee is not entitled to indemnification with respect to any specific Proceeding, the Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing the Indemnitee’s right to indemnification pursuant to this Agreement. In such an enforcement hearing or Proceeding, the burden of proving by clear and convincing evidence that indemnification or advances are not appropriate shall be on the Company. Neither the failure of the Company (including its Board of Directors, stockholders, independent legal counsel or the panel of arbitrators) to have made a determination prior to the

commencement of such action that the Indemnitee is entitled to indemnification hereunder, nor an actual determination by the Company (including its Board of Directors or independent legal counsel or the panel of arbitrators) that the Indemnitee is not entitled to indemnification hereunder, shall be a defense to the action or create any presumption that the Indemnitee is not entitled to indemnification hereunder.

(d) Indemnification of Certain Expenses. The Company shall indemnify the Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails by clear and convincing evidence in such hearing or proceeding.

29. Assumption of Defense. In the event the Company shall be obligated to pay the Expenses of the Indemnitee in any Proceeding, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to the Indemnitee, upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company shall not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same Proceeding, provided that (a) the Indemnitee shall have the right to employ separate counsel in such Proceeding at the Indemnitee’s own expense, and (b) if (i) the employment of separate counsel by the Indemnitee has been previously authorized in writing by the Company, (ii) the Indemnitee’s separate counsel delivers a written statement to the Company stating that such counsel has reasonably concluded that there may be an actual or potential conflict of interest or actual or potential separate or different defenses between the Company and the Indemnitee in the conduct of any such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding within a reasonable time, then in any such event the reasonable fees and expenses of the Indemnitee’s counsel shall be paid by the Company.

30. Insurance. The Company may, but is not obligated to, obtain directors’ and officers’ liability insurance (“D&O Insurance”) on behalf of the Indemnitee against any liability which may be asserted against or incurred by the Indemnitee in Indemnitee’s capacity or arising out of the Indemnitee’s status as an Agent of the Company, whether or not the Company would have the power to indemnify the Indemnitee hereunder. Notwithstanding any other provision of this Agreement, the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines or penalties which have been paid directly to the Indemnitee by D&O Insurance. If the Company has D&O Insurance in effect at the time the Company receives from the Indemnitee any notice of the commencement or threat of a Proceeding, the Company shall give prompt notice of the commencement or threat of such Proceeding to the insurers in accordance with the procedures set forth in the D&O Insurance policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policy.

31. Exceptions.

(a) Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify the Indemnitee pursuant to the terms of this Agreement on account of any Proceeding with respect to (i) remuneration paid to the Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in

violation of law; (ii) which final judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state or local statute; or (iii) which (but only to the extent that) it is determined by final judgment or other final adjudication that the Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying Proceeding or action in connection with which indemnification is sought or a separate Proceeding or action to establish rights and liabilities under this Agreement.

(b) Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”) in any registration statement filed with the SEC under the Act. The Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K promulgated under the Act requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of the Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. The Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.

(c) Claims Initiated by the Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to the Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement as contemplated by Section 7(c) or any other statute or law or otherwise as required under Section 145, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors of the Company finds it to be appropriate.

(d) Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding effected without the Company’s prior written consent. Neither the Company nor the Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company determines in good faith (pursuant to Section 3(c) hereof) that the Indemnitee is not or ultimately will not be entitled to indemnification hereunder.

32. Nonexclusivity. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company’s certificate of incorporation or bylaws, in any court in which a Proceeding is brought, the vote of the Company’s stockholders or disinterested directors, other agreements or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying his position as an Agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has

ceased acting as an Agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. Any provision herein to the contrary notwithstanding, the Company may provide, in specific cases, the Indemnitee with full or partial indemnification of any Expenses if the Board of Directors of the Company determines that such indemnification is appropriate.

33. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

34. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent now or hereafter permitted by law.

35. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 13 hereof.

36. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the certificate of incorporation or bylaws of the Company or by other agreements.

37. Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto.

38. Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three business days after deposit in the United States mails, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice).

39. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

40. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement.

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.

	THE “COMPANY”:


	Maxwell Technologies, Inc., a Delaware corporation


	By:
		Title:
		Address: 9244 Balboa Avenue San Diego, CA 92123 Attention: Chief Executive Officer


	THE “INDEMNITEE”:



	Signature of the Indemnitee



	Print or Type Name of the Indemnitee


	Address:

EX-99.A 7 j1027_ex99da.htm EX-99.A

EXHIBIT (99) (a)

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Maxwell Technologies, Inc. (the “Company”) on Form 10-Q for period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard D. Balanson President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of March 31, 2003.

May 14, 2003		/s/ Richard D. Balanson
Date		Richard D. Balanson, President and
		Chief Executive Officer

EX-99.B 8 j1027_ex99db.htm EX-99.B

EXHIBIT (99) (b)

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Maxwell Technologies, Inc. (the “Company”) on Form 10-Q for period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James A. Baumker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of March 31, 2003.

May 14, 2002		/s/ James A. Baumker
Date		James A. Baumker, Vice President and
		Chief Financial Officer

Commission File Number 0-10964

Delaware

95-2390133

Item 1.

Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 1.

Legal Proceedings

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Sales

Total Costs and Expenses

Provision (Credit) For Income Taxes

Discontinued Operations

Liquidity and Capital Resources

Bank Credit Agreement

Critical Accounting Policies

Revenue Recognition

Accounts Receivable

Excess and Obsolete Inventory

Assets Held for Sale and Remaining Lease Obligations

Loss in the Sale of the I-Bus Computing Systems Business

Long-Lived Assets and Goodwill

Valuation Allowance for Deferred Tax Assets

Inflation and Changes in Prices

Forward-Looking Statements

Item 3. Quantitative and Qualitative Disclosures About Market Risk

CERTIFICATIONS

EXHIBIT 10.45