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 June 30, 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.
YesýNoo

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

YesýNoo

As of August 6, 2003, Registrant had only one class of common stock, of which there were 13,799,227 shares outstanding.

MAXWELL TECHNOLOGIES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarter ended June 30, 2003

PART I
Item 1.	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 Quarterly Report on Form 10-Q 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 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.

2

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

	June 30, 2003			December 31, 2002
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,939		$	3,545
Short-term investments	5,586			7,546
Trade and other accounts receivable, net	6,242			8,530
Inventories	11,378			11,833
Prepaid expenses and other current assets	1,718			1,037
Assets held-for-sale	7,356			7,356
Total current assets	34,219			39,847
Property, plant and equipment, net	10,999			11,653
Other intangible assets, net	2,013			2,009
Goodwill	17,923			17,577
Other non-current assets	292			294
	$	65,446		$	71,380
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	8,705		$	11,508
Deferred revenue	5,267			2,305
Accrued employee compensation	1,912			1,590
Short-term borrowings and current portion of long-term debt	3,417			570
Deferred tax liability	285			272
Liabilities of discontinued operations	2,372			2,326
Total current liabilities	21,958			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; 13,787 and 13,726 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively	1,379			1,373
Additional paid-in capital	112,745			112,255
Accumulated deficit	(71,815		)	(64,015		)
Accumulated other comprehensive income	996			338
Total stockholders’ equity	43,305			49,951
	$	65,446		$	71,380

See accompanying notes

3

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

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Sales	$	10,653		$	13,155		$	20,894		$	25,944
Costs and expenses:
Cost of sales	9,296			13,951			18,226			25,793
Selling, general and administrative	3,504			4,904			7,577			9,595
Research and development	1,574			2,246			2,881			4,913
Other	(189		)	552			(458		)	338
Total costs and expenses	14,185			21,653			28,226			40,639
Loss from continuing operations before income taxes	(3,532		)	(8,498		)	(7,332		)	(14,695		)
Provision (benefit) for income taxes	(86		)	12			(100		)	(279		)
Loss from continuing operations	(3,446		)	(8,510		)	(7,232		)	(14,416		)
Discontinued operations, net of taxes:
Income (loss) from operations	7			(879		)	(568		)	(1,684		)
Net loss	$	(3,439	)	$	(9,389	)	$	(7,800	)	$	(16,100	)
Basic and diluted net loss per share:
Loss from continuing operations	$	(0.25	)	$	(0.75	)	$	(0.53	)	$	(1.33	)
Loss from discontinued operations	0.00			(0.08		)	(0.04		)	(0.16		)
Net loss	$	(0.25	)	$	(0.83	)	$	(0.57	)	$	(1.49	)
Weighted average shares used in computing
Basic and diluted net loss per share	13,774			11,276			13,758			10,838

See accompanying notes

4

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

(in thousands)

	Six Months Ended June 30,
	2003			2002
Operating activities:
Loss from continuing operations	$	(7,232	)	$	(14,416	)
Adjustments to reconcile loss from continuing operating activities to net cash used in operating activities:
Depreciation and amortization	1,941			2,117
Other noncash items	(136		)	2,938
Changes in operating assets and liabilities, net	2,651			1,100
Net cash used in operating activities	(2,776		)	(8,261		)
Investing activities:
Proceeds from sale of businesses and equipment	496			—
Purchases of property and equipment	(1,093		)	(828		)
Proceeds from sale of short-term investments	4,388			8,669
Purchases of short-term investments	(2,490		)	(7,224		)
Net cash provided by investing activities	1,301			617
Financing activities:
Principal payments on long-term debt and short-term borrowings	(520		)	(125		)
Proceeds from short-term borrowings	692			—
Proceeds from issuance of Company and subsidiary stock	183			970
Net cash provided by financing activities	355			845
Net cash used in discontinued operations	(522		)	(320		)
Effect of exchange rate changes on cash and cash equivalents	36			30
Decrease in cash and cash equivalents	(1,606		)	(7,089		)
Cash and cash equivalents at beginning of period	3,545			13,673
Cash and cash equivalents at end of period	$	1,939		$	6,584

See accompanying notes

5

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 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 for the fair value of the obligation 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.

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 June 30,						Six Months ended June 30,
	2003			2002			2003			2002
Net loss, as reported	$	(3,439	)	$	(9,389	)	$	(7,800	)	$	(16,100	)
Add: Stock-based employee compensation expense included in reported net income, net of tax	$	—		$	—		$	—		$	—
Deduct: total Stock-based employee compensation expense determined under fair value based method for awards, net of tax	$	(2,410	)	$	(2,115	)	$	(4,237	)	$	(5,437	)
Pro forma net loss	$	(5,849	)	$	(11,504	)	$	(12,037	)	$	(21,537	)
Basic and diluted earnings per share - as reported	$	(0.25	)	$	(0.83	)	$	(0.57	)	$	(1.49	)
Basic and diluted earnings per share - pro forma	$	(0.42	)	$	(1.02	)	$	(0.87	)	$	(1.99	)

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.

	Three  Months ended June 30,		Six  Months ended June 30,
	2003	2002	2003	2002
Risk free interest rate	3.3	3.3	3.3	3.3
Dividend yield	—	—	—	—
Volatility	62.9	68.4	56.6	68.4
Weighted average expected life	5 years	5 years	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 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 the Company's employee stock options.

6

Note 2– Strategic Alliance

The Company has formed an alliance with Yeong-Long Technologies Co., Ltd., (“YEC”) to manufacture and market its proprietary BOOSTCAP® ultracapacitor products in China. The alliance grants an exclusive royalty-bearing license to YEC 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 YEC with proprietary electrode material to make ultracapacitor cells, and will begin purchasing finished ultracapacitors from YEC 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 YEC’s ultracapacitor sales. Maxwell has offered YEC the option to buy the right to manufacture the electrode material for a separate payment. The Company has accounted for its arrangement with YEC 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 YEC 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 YEC has been determined to represent a separate unit of accounting and revenue will be recognized as the material is delivered.

7

Note 3 – Inventories

Inventories consist of the following (in thousands):

	June 30, 2003			December 31, 2002
Inventory:
Finished goods	$	5,242		$	4,495
Work-in-process	2,800			2,130
Raw material and purchased parts	6,781			7,234
Inventory reserve	(3,445		)	(2,026		)
	$	11,378		$	11,833

8

Note 4 – Warranty Reserve

The Company provides limited warranties on certain of its products for periods of up to two 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.

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

	Balance at As of December 31, 2002		Additions Charges to Cost and Expenses		Deductions For Costs Incurred			Deductions For Change in Estimate			Balance at As of June 30, 2003
Accrued Warranty	$	947	$	427	$	(354	)	$	(154	)	$	866

9

Note 5 – Comprehensive Income

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Net loss	$	(3,439	)	$	(9,389	)	$	(7,800	)	$	(16,100	)
Foreign currency translation adjustments	278			55			720			124
Unrealized gain (loss) on securities	(23		)	65			(62		)	11
Comprehensive loss	$	(3,184	)	$	(9,269	)	$	(7,142	)	$	(15,965	)

10

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 June 30,						For the Six Months Ended June 30,
	2003			2002			2003			2002
Revenue:
High Reliability	$	7,915		$	7,872		$	15,748		$	15,427
Winding Equipment	2,738			—			5,146			—
I-Bus Computing Systems	—			4,156			—			8,295
Sierra and TeknaSeal	—			1,127			—			2,222
Consolidated total	$	10,653		$	13,155		$	20,894		$	25,944
Income (loss):
High Reliability	$	(2,462	)	$	(1,783	)	$	(4,957	)	$	(4,813	)
Winding Equipment	(289		)	—			(526		)	—
I-Bus Computing Systems	—			(5,571		)	(114		)	(8,292		)
Sierra and TeknaSeal	—			336			—			610
Total segment operating loss	(2,751		)	(7,018		)	(5,597		)	(12,495		)
Corporate expenses	1,016			928			2,225			1,862
Gain on sale of businesses	(235		)	—			(463		)	—
Restructuring	—			812			—			812
Minority interest	—			—			—			(241		)
Interest and other, net	—			(260		)	(27		)	(233		)
Loss from continuing operations before income taxes	$	(3,532	)	$	(8,498	)	$	(7,332	)	$	(14,695	)

11

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		Total Restructuring Reserve
Balance December 31, 2002	$	304		$	47	$	351
Utilization of reserves:
Cash	(211		)	—		(211		)
Balance June 30, 2003	$	93		$	47	$	140

12

Note 8 – 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 consolidated statements of operations.  The businesses included in discontinued operations had sales aggregating $7,000 for the three months ended June 30, 2003 and $473,000 for the three months ended June 30, 2002. Sales for the six months ended June 30, 2003 and 2002 were $187,000 and $703,000 respectively. 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.

Note 9 – Service Agreements

In May 2003, the Company and its former Chairman of the Board entered into a services agreement whereby the former Chairman received an option to acquire 94,251 shares at the fair market value as of the date of the grant.  The options are fully vested and have a fixed life of four years.  Accordingly, the Company recorded compensation expense of $313,000 representing the fair value of the options pursuant to the Black-Scholes valuation model.

Note 10 – Product Line Divestiture

In June 2003, the Company decided to discontinue marketing and supporting a product line of accelerated life testers and has recorded a charge of $444,000 related to write-off of inventory and equipment.  In addition, the Company is in discussions with certain customers to terminate related warranty obligations and anticipates recording further charges of $600,000 as these contractual obligations are settled.  This product line did not record any revenue in 2003.

Note 11 – Contingencies

The Company enters into indemnification agreements in the ordinary course of business in which the indemnified party is held harmless and is reimbursed for losses incurred from claims by third parties.  In connection with divestitures of certain assets or businesses, the Company often provides indemnities to the buyer with respect to certain matters including, for example, environmental liabilities and unidentified liabilities related to periods prior to the disposition.  Due to the uncertain nature of the indemnities, the maximum liability cannot be quantified.  Liabilities for obligations are recorded where appropriate and when they can be reasonably estimated.  Historically, the Company has not made significant payments for these obligations.

13

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

Overview

Our strategic focus is to develop markets for BOOSTCAP® ultracapacitors and to position Maxwell as the dominant supplier of ultracapacitors.  We have positioned ultracapactors as an enabling, yet supplemental technology.  That is, in most cases we augment the performance of a conventional energy storage option, rather than replace it.

Our BOOSTCAP ultracapacitors are targeted at three market segments.  The very high volume market is consumer electronics, but the price point is relatively low.  Digital cameras represent the more significant application that we have penetrated in this market.  The medium volume market is industrial.  Applications that we have penetrated include alternate energy generation, valves and actuators and back-up power.  The third market is transportation.  This includes buses, trucks, trains, planes and automobiles.  This market is further divided into locomotion, which includes hybrid electric and all-electric vehicles, stationary and moving energy recapture in cars, trucks and trains and distributed power systems.  Distributed power system opportunities arise from a trend in the transportation market to replace mechanical and hydraulic systems with electric systems and include door-locks, drive- by- wire, electric power steering, back up for smart controllers, all-electric braking, air conditioning, and others. This segment also includes augmentation power sources such as diesel engine starting in trucks and trains.

Sales of our BOOSTCAP ultracapacitors have continued their quarter-to-quarter increase and we anticipate continued significant growth in BOOSTCAP sales as we are projecting increases in existing and new applications.  However, continuing poor economic conditions, particularly in the commercial satellite markets and the electrical infrastructure redevelopment markets, have continued to depress bookings and revenue in the remainder of our High Reliability segment.  The High Reliability segment accounts for approximately 75% of current quarter revenue.  Despite the projected revenue increases in our BOOSTCAP ultracapacitors, we expect continued losses in the High Reliability segment until revenue from the other products in this segment increase from the current depressed levels.

Our Winding Equipment segment, which accounts for 25% of current quarter revenue, continues to perform below our expectations due to high start-up costs associated with a new line of products and continued price pressure, particularly from companies in Asia.  We are continuing to evaluate our cost position and alternatives to reduce costs and improve product margins.

Results of Operations

Sales

Our consolidated sales for the quarter ended June 30, 2003 were $10.7 million, a decrease of $2.5 million, or 19%, from the quarter ended June 30, 2002.  Consolidated sales for the six months ended June 30, 2003 were $20.9 million, a decrease of $5.1 million, or 19%, from the six months ended June 30, 2002.  Sharp declines in the sale of power systems products to GE Medical Systems, which has decided to source these products from their 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.  These declines were partially offset by gains in sales of BOOSTCAP ultracapacitors, which more than doubled compared with the same quarter in 2002.  Sales increased from the acquisition of Montena Components in July of 2002, contributing approximately $5.8 million and $11.6 million of revenue for the quarter and six months ended June 30, 2003, respectively, and decreased $5.3 million and $10.5 million for the quarter and six months ended June 30, 2003, respectively due to the divestitures of I-Bus Computing Systems and TeknaSeal in September 2002.  Excluding the acquisition and the divestitures, our sales decreased $3.0 million or 38% and  $6.2 million or 40% for the quarter and six months ended June 30, 2003, respectively, compared with the same lines of business in 2002.

Costs and Expenses

Cost of sales for the quarter ended June 30, 2003 was $9.3 million, a decrease of $4.7 million, or 33%, from the quarter ended June 30, 2002.  Cost of sales as a percent of net sales was 87% and 106% in the quarter ended June 30, 2003 and 2002, respectively.  Cost of sales for the six months ended June 30, 2003 and 2002 was $18.2 million, or 87% of sales and $25.8 million, or 99% of sales, respectively.  Although gross profit margins have improved because of better revenue mix and cost containment efforts, they remain depressed because of the general downturn in the economy and industrial markets served by the Company.  This has resulted in inventory charges of $0.5 million for the quarter ended March 31, 2003 and continued under-utilized production facilities.  During the current quarter, the Company decided to discontinue marketing and supporting a product line of accelerated life testers and has recorded a charge of $0.4 million related to write-off of inventory and equipment.  In addition, the Company is in discussions with certain customers to terminate related warranty obligations and anticipates recording further charges estimated at $0.6 million as these obligations are settled.  This product line did not record any revenue in 2003.

Selling, General and Administrative (SG&A) expenses for the quarter ended June 30, 2003 were $3.5 million, a decrease of $1.4 million, or 29%, from the quarter ended June 30, 2002.  SG&A as a percent of net sales was 33% and 37% for the quarters ended June 30 2003 and 2002, respectively.  SG&A expenses for the six months ended June 30, 2003 and 2002 were $7.6 million, or 36% of sales and $9.6 million, or 37% of sales, respectively.  During the current quarter, the Company recorded $0.3 million as a compensation charge for stock options granted to the Company’s former Chairman.  During the quarter ended March 31, 2003, the Company recorded $0.5 million in charges related to reserves against loans made to a former subsidiary and other accruals mainly for severance.

Research and development (R&D) expenses for the quarter ended June 30, 2003 were $1.6 million, a decrease of $0.7 million, or 30%, from the quarter ended June 30, 2002.  R&D as a percent of net sales was 15% and 17% for the quarters ended June 30 2003 and 2002, respectively.  R&D expenses for the six months ended June 30, 2003 and 2002 were $2.9 million, or 14% of sales and $4.9 million, or 19% of sales, respectively.  The decrease is mainly attributable to the sale of our former I-Bus Computing Systems segment.

14

Other costs and expenses (credits) net for the quarter ended June 30, 2003 were a credit of $0.2 million compared with a charge of $0.6 million for the quarter ended June 30, 2002.  Other costs and expenses (credits) net for the six months ended June 30, 2003 were a credit of $0.5 million compared with a charge of $0.3 million for the six months ended June 30, 2002.  The Company recorded $0.8 million in restructuring charges in the second fiscal quarter of 2002 related to the I-Bus Computing Systems business, which was sold in September 2002.  In the first and second fiscal quarters of 2003, the Company recorded $0.2 million in gains related to contingent consideration received from the sale of our TeknaSeal division, which was sold in the Company’s fourth fiscal quarter of 2002.  Interest (income) expense, net for the quarter ended June 30, 2003 was essentially zero compared with a credit of  $44 thousand for the quarter ended June 30, 2002.  Interest (income) expense, net for the six months ended June 30, 2003 was a credit of $27 thousand compared with a credit of  $0.2 million for the six months ended June 30, 2002.  The Company used proceeds from the sale of businesses to fund operations and pay down debt and the excess was invested in high quality short-term marketable investments.  Lower net interest income is due to less available cash to invest.

Income (Loss) From Continuing Operations Before Taxes

Loss from continuing operations before taxes was $3.4 million and $8.5 million in the quarters ended June 30, 2003 and 2002, respectively, and $7.2 million and $14.4 million in the six months ended June 30 2003 and 2002, respectively.  The year-to-year improvements for the quarter and six months are due mainly to the sale of I-Bus Computing Systems in September 2002.

High Reliability segment loss was $2.5 million and $1.8 million in the quarters ended June 30, 2003 and 2002, respectively and $5.0 million and $4.8 million in the six months ended June 30, 2003 and 2002, respectively.  The acquisition of Montena Components in July 2002 did not significantly contribute to the year-to-year change for the quarter or for the six months ended June 30, 2003 as its income before taxes was essentially break-even.  The change was due primarily to lower revenues of power products and microelectronic products, which were partially offset by cost reductions and higher BOOSTCAP ultracapacitor revenues.

The Winding Equipment segment, which was part of our acquisition of Montena Components in July 2002, recorded losses of $0.3 million and $0.5 million in the quarter the six months ended June 30 2003.  The loss was due primarily to high start-up costs related to a new winding product and continued relatively low profitability sales to customers in China.

I-Bus Computing Systems, which was sold of in September 2002, recorded a loss of $5.6 million in the quarter ended June 30 2002 and $0.1 million and $8.3 million in the six months ended June 30 2003 and 2002, respectively.

TeknaSeal, which was sold in September 2002, generated earnings of $0.2 million and $0.5 million for the quarter and six months ended June 30, 2003, respectively, related to contingent consideration received from the sale.

Provision (Credit) For Income Taxes

The credit for income taxes for the quarter ended June 30, 2003 was $0.1 million compared to $12 thousand in the quarter ended June 30, 2002.  The credit for income taxes for the six months ended June 30, 2003 was also $0.1 million compared with $0.3 million for the six months ended June 30, 2002.  The credit recorded in 2002 was related to a federal tax refund for taxes paid in 2001.

Discontinued Operations

Discontinued Operations was essentially zero and $0.9 million for the quarters ended June 30, 2003 and June 30, 2002, respectively.  Discontinued Operations was a loss of $0.6 million compared with a loss of $1.7 million for the six months ended June 30, 2003 and June 30, 2002, respectively.  Discontinued Operations are comprised of the Company’s Government Systems Division, which was sold in 2001, and its PurePulse subsidiary, whose operations were suspended in 2002.  The loss for 2003 consists of a charge of $0.7 million due to a change in the estimated liability for a certain continuing lease obligation partially offset by a credit of $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 six months ended June 30, 2003, was approximately $2.8 million, as compared with $8.3 million in the six months ended June 30, 2002. In February 2003, we received a non-refundable payment of $3.0 million from YEC, our BOOSTCAP ultracapacitor alliance partner in China, which has been classified as deferred revenue.  Cash used in discontinued operations in the six months ended June 30, 2003 was $0.5 million and consisted mainly of payments for residual lease obligations of PurePulse and the Government Systems Division.  Capital expenditures for the six months ended June 30, 2003 and 2002 were $1.1 million and $0.8 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 June 30, 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 third quarter of 2003.

Assets held for sale consist of the Company-owned building in San Diego, which housed the former I-Bus/Phoenix production and administration.  We expect to sell the facility during the current fiscal year for approximately $9.0 million gross proceeds.  A portion of the proceeds will be used to pay off the balance of the amount borrowed from Comerica Bank, which totaled $2.8 million as of June 30, 2003. See "Bank Credit Agreement" below.

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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 at least the next twelve months.

Although we believe that cash on hand and future cash flows will be adequate 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 Agreements

In February 2001, we entered into a Loan and Security Agreement with Comerica Bank. 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 4.50 % at June 30, 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 $18 million.

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

                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%.  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 SA and there are no loan covenants. As of June 30, 2003, there was $0.4 million outstanding under the credit agreement, $0.3 million assigned to letters of guarantee and an available borrowing balance of $3.0 million.

Net Liabilities of Discontinued Operations

PurePulse, which is classified as discontinued operations, has minority equity investors.  As of June 30 2003, minority investors owned approximately 18.2% of the outstanding stock of PurePulse with an accounting basis of $0.9 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 certain 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. Ingeneral, 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. This revenue, including estimated profits, was recognized as costs were incurred and included provisions for any

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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, which is classified as held for sale, is carried at historical cost. The Company believes that, based on an 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 "Discontinued Operations'' above).  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 $7.0 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 a 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 acquisition of Montena had not materially changed and that 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.

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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.

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 June 30, 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 $5.6 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

(a)           Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

(b)           Changes in Internal Controls over Financial Reporting. During the most recent fiscal quarter, there have not been any significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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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. Results of submission of matters to a vote of security holders were reported on Quarterly Report 10-Q for the quarter ended March 31, 2003.

Item 5.Other Information

None

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Item 6.Exhibits and Reports on Form 8-K

(a)Exhibits

3.4	Bylaws of the Registrant as amended on July 29, 2003.
10.48	Amended and Restated 1995 Stock Option Plan
10.49	Ken Potashner's Separation Agreement and General Release of Claim
10.50	Rich Balanson's Employment Agreement
31.1	Chief Executive Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Accounting Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.	Chief Executive and Chief Accounting Officers’ Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)Form 8-K filed on May 6, 2003 reporting the issuance of a press release announcing its financial results for the first fiscal quarter of 2003.

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.
August 11, 2003	/s/ RICHARD D. BALANSON
Date	Richard D. Balanson, Chief Executive Officer
August 11, 2003	/s/ JAMES A. BAUMKER
Date	James A. Baumker, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-3.4

Exhibit 3.4

AMENDED AND RESTATED BYLAWS

OF

MAXWELL TECHNOLOGIES, INC.

ARTICLE I

OFFICES

Section 1.1Registered 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 1.2Principal 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 1.3Other Offices.  The Corporation may also have offices at such other places both within and without Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.1Location of Meetings.  Meetings of stockholders for any purpose may be held at such time and place, within or without Delaware, as may be fixed by the Board of Directors, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.  The Board of Directors may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Delaware statute.

Section 2.2Time of Annual Meeting.  Annual meetings of stockholders, commencing with the year 2004 shall be held on the second Wednesday of the fifth month following the close of the fiscal year if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which meeting they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.

Section 2.3Notice of Annual Meeting.  Written notice of the annual meeting stating the place, if any, date and hour of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at

such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.

Section 2.4Stockholder List.  The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten 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 each stockholder and the number of shares registered in the name of each stockholder.  Nothing contained in this Section 2.4 shall require the Corporation to include electronic mail addresses or other electronic contact information on such list.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation.  If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  If the meeting is to be held solely by means of remote communication, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  The list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

Section 2.5Stockholder Proposals. In addition to any other applicable requirements, for a stockholder proposal to be considered for inclusion in the corporation’s proxy statement for the annual meeting, the stockholder must have satisfied all of the conditions set forth in Rule 14a-8 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor rule thereto (the “Proxy Rules”), including particularly the requirement that the stockholder give timely written notice of the proposal to the corporation.

Stockholders may present proposals which are proper subjects for consideration at an annual meeting, even if the proposal is not submitted by the deadline for consideration for inclusion in the proxy statement for the meeting.  For a stockholder proposal to properly be brought before an annual meeting, in addition to any other applicable requirements, the stockholder must satisfy all of the conditions set forth in the Proxy Rules; provided, however, that the proposal must be received by the Secretary of the corporation not less than ninety (90) calendar days prior to the date of the corporation’s proxy statement delivered to stockholders in connection with the previous year’s annual meeting.  If the corporation did not hold an annual meeting in the previous year, or if the date of the meeting changed by more than thirty (30) days from the date of the previous year’s annual meeting, the proposal must be received by the corporation not less than sixty (60) calendar days prior to the meeting date or not more than ten (10) calendar days after the public announcement of the meeting date if the public announcement is made less than sixty (60) calendar days prior to the date of the meeting.

Each stockholder notice must set forth, as to each matter the stockholder proposes to include in the proxy statement and/or bring before the annual meeting, the information required

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by the Proxy Rules, and indicate any material interest of the stockholder in the business proposed to be brought before the meeting.

Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures and conditions set forth in this Article II and the Proxy Rules; provided, however, that nothing in this Article II or the Proxy Rules shall be deemed to preclude discussion of any business properly brought before the annual meeting.  The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article II, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

Section 2.6Special Meetings.  Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Board of Directors [the chairman of the board,] or chief executive officer [Note: can be anyone designated by certificate of incorporation or bylaws] and shall be called by the chairman of the board or secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote.  Such request shall state the purpose or purposes of the proposed meeting.

Section 2.7Notice of Special Meetings.  Written notice of a special meeting stating the place, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting.

Section 2.8Business Transacted at Special Meetings.  Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 2.9Conduct 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 chief executive officer.  [Note:  this may not be “SOX state of art”  best practices.]  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 2.10Quorum.  The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation.  If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than the announcement at the meeting, until a quorum shall be present.  At such adjourned meeting, at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.  If the adjournment is for more

3

than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 2.11Majority Vote.  When a quorum is present at any meeting, (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, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.

Section 2.12One Vote Per Share.  Each stockholder shall, at every meeting of the stockholders, be entitled to one vote for each share of the capital stock having voting power held by such stockholder.

Section 2.13Action by Written Consent.  Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.  If, pursuant to this provision, corporate action is taken without a meeting by less than unanimous written consent, prompt notice of the taking of such action shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as provided by statute and these bylaws.  Procedures for consenting to corporate action by electronic transmission shall be governed by statute.

Section 2.14Proxies.  Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by proxy, but no proxy shall be voted or acted upon after three (3) years from its date, unless the person executing the proxy specifies therein a longer period of time for which it is to continue in force. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the secretary of the Corporation.

Section 2.15Inspectors 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.

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The number of Inspectors of Election shall be one or three.  If there are three 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.

Section 2.16Advanced Notice of Business at Annual Meetings.  At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.  To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder.  For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the corporation.  To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10^th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made.  A stockholder’s notice to the secretary shall set forth, as to each matter the stockholder proposes to bring before the annual meeting, (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business.  Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.16.  The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 2.16, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

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ARTICLE III

DIRECTORS

Section 3.1Management of Business.  The business of the Corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

Section 3.2Number; Election; Qualifications.  The number of directors shall constitute the whole Board shall be such number as shall be determined from time to time by resolution of the Board of Directors.

The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.5 of this Article, and each director elected shall hold office until his successor is elected and qualified.  Directors need not be stockholders.

Section 3.3Election and Term of Office of Directors.  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.

Notwithstanding the foregoing provisions of this Section 3.3, 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 3.4Nomination of Directors.

(a)Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board as directors at the annual meeting may be made at a meeting of stockholders, by or at the direction of the Board or a committee appointed by the Board or by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article III.

(i)Nominations of directors, other than those made by or at the direction of the Board or such committee, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation within the time periods prescribed for consideration for inclusion of stockholder proposals in the corporation’s proxy statement for an annual meeting set forth in Article II of these bylaws.

(ii)Such stockholder’s notice must set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or

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employment of such person, (iii) the class and number of shares of capital stock of the corporation which are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to the Proxy Rules (including without limitation such person’s written consent to being named in the proxy statement as the nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation’s books, of such stockholder and (ii) the class and number of shares of the corporation which are beneficially owned (as defined by Rule 13d-3 of the Exchange Act or any successor rule thereto)by such stockholder.

(b)At the request of the Board any person nominated for election as a director shall furnish to the secretary of the Corporation any other information as may reasonably be required by the corporation to determine the eligibility of the proposed nominee to serve as a director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Article III.

(c)The chairman of a meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the required procedures, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

Section 3.5Vacancies.  Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors are duly elected and shall qualify, unless sooner displaced.  If there are no directors in office, then an election of directors may be held in the manner provided by statute.  If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the votting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships or to replace the directors chosen by the directors then in office.

Section 3.6Removal.  Any director may be removed from office only as provided in Article Tenth of the Restated Certificate of Incorporation of the Corporation.

Meetings of the Board of Directors

Section 3.7Place 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

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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 3.8Initial Meeting.  The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present.

In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

Section 3.9Regular Meetings.  Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.

Section 3.10Special Meetings.  Special meetings of the Board of Directors may be called by the chairman of the board or chief executive officer on two days’ notice to each director, either personally or by mail or by electronic transmission or by telegram; special meetings shall be called by the chairman of the board or secretary in like manner and on like notice on the written request of two directors.

Section 3.11Quorum.  At all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation.  If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 3.12Telephonic Meeting.  Members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of such Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to these bylaws shall constitute presence in person at such meeting.

Section 3.13Action by Written Consent.  Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing or by

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electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.  Such filings shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Committees of Directors

Section 3.14Authority of Committees.  The Board of Directors may designate one or more committees, each committee to consist of one or more directors of the Corporation.  The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.

Any such committee, to the extent provided in the Board resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that no such committee shall have the power or authority in reference to the following matters:  (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by this chapter to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any by-law of the Corporation.

Section 3.15Meeting 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 or any two members of such committee.  Unless otherwise provided by such rules or by such resolution, the provisions of these bylaws under this Article III 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 3.16Committee Minutes.  Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

Section 3.17Fees 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

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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 3.17.  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, including without limitation grants of stock option and of shares of restricted stock.  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.

ARTICLE IV

NOTICES

Section 4.1Method of Notice.  Whenever under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid, or by electronic transmission, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail or, in the case of electronic transmission, as provided by statute.  Notice to directors may also be personally delivered, or given by telegram.

Section 4.2Waiver.  Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing signed by the person or persons entitled to notice, or a waiver by electronic transmission by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

Section 4.3Notice to stockholders sharing an address.  Notwithstanding anything contained in these bylaws to the contrary, and without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under the Delaware General Corporation Law, the Corporation’s certificate of incorporation or these bylaws, shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given.  Any such consent shall be revocable by the stockholder by written notice to the Corporation.  Any stockholder who fails to object in writing to the Corporation, within sixty days of having been given written notice by the Corporation of its intention to send a single notice under this Section, shall be deemed to have consented to receiving such single written notice.

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ARTICLE V

OFFICERS

Section 5.1Offices Created.  The officers of the Corporation shall be chosen by the Board of Directors and shall be a chairman of the board, a chief executive officer, president, such vice presidents as the Board of Directors deems appropriate, a secretary and a treasurer.  The Board of Directors may also choose additional vice presidents or assistant vice presidents, and one or more assistant secretaries and assistant treasurers.  Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.

Section 5.2Appointment of Principal Officers.  The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a chairman of the board, a president, a chief executive officer, a secretary and a treasurer and such other officers as the Board deems appropriate.

Section 5.3Appointment of Other Officers.  The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.

Section 5.4Compensation.  The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.  Any payments made to an officer of the Corporation such as salary, commission, bonus, interest or rent, or entertainment expenses incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the Corporation to the full extent of such disallowance.  It shall be the duty of the directors, as a Board, to enforce payment of each such amount disallowed.  In lieu of payment by the officer, subject to the determination of the directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered.

Section 5.5Term.  The officers of the Corporation shall hold office until their successors are chosen and qualify.  Any officer elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the Board of Directors.  Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.

Section 5.6Resignations. 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 5.7Removal.  Any officer or assistant officer of the Corporation may be removed, with or without cause, by the affirmative vote of a majority of the entire Board of Directors.

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The President and the Chief Executive Officer

Section 5.8General Duties. 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 Board of Directors or these bylaws.  The president and the chief executive officer of the Corporation shall have general and active management of the business of the Corporation as delegated and specified by the Board of Directors and shall see that all orders and resolutions of the Board of Directors are carried into effect.  In addition, he shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, at all meetings of the Board of Directors.  The offices of president and chief executive officer may, but need not, be held by the same person.  The offices of president and chief executive officer shall be held by the same person unless otherwise designated by the Board of Directors.  Subject to such limitations as may be imposed by the Board of Directors, any powers or duties vested in the chief executive officer or president may be delegated by him to such subordinates as he may choose.

Section 5.9Authority to Execute Contracts.  The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to the chief executive officer or to some other officer or agent of the Corporation.

The Vice Presidents

Section 5.10Duties of Vice President.  In the absence of the president or in the event of the president’s inability or refusal to act, the vice president (or in the event that there be more than one vice president, then presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president.  The vice presidents shall perform such other duties and have such other powers as the Board of Directors, the chief executive officer or president may from time to time prescribe.

The Secretary and Assistant Secretaries

Section 5.11Duties of Secretary.  The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required.  He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he shall be.  He shall have custody of the corporate seal of the Corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary.  The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The

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secretary shall perform such other duties and have such other powers as the Board of Directors, the chief executive officer or president may from time to time prescribe.

Section 5.12Duties of Assistant Secretaries.  The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chief executive officer or president may from time to time prescribe.

The Treasurer and Assistant Treasurers

Section 5.13Duties of Treasurer.  The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.  The treasurer shall perform such other duties and have such other powers as the Board of Directors, the chief executive officer or president may from time to time prescribe.

Section 5.14Disbursement of Funds.  The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president, to the chief executive officer and to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation.

Section 5.15Bond.  If required by the Board of Directors, the treasurer shall give the Corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the treasurer’s office and for the restoration to the Corporation, in case of the treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.

Section 5.16Assistant Treasurers.  The assistant treasurer, or if there shall be more than one, the assistant treasurers, in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors, the chief executive officer or the president may from time to time prescribe.

Chairman of the Board

Section 5.17Duties of Chairman of the Board.  The chairman of the board shall preside at all meetings of the Board of Directors and, in the absence of the chief executive officer, at  all meetings of the stockholders.  The chairman of the board shall be a director of the Corporation and may, but need not, hold another corporate office.  In the absence of the chairman of the board or in the event of the chairman’s inability or refusal to act, the Board of Directors shall appoint from among their number a chairman pro tem to preside at meetings of the Board of

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Directors or of the stockholders. 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.

ARTICLE VI

INDEMNIFICATION

Section 6.1Right 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 6.3 of this Article VI, 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

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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 6.2Prepayment of Expenses.  The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by or on behalf of such director or officer to repay all amounts advanced if it should be ultimately determined that such person is not entitled to be indemnified under this Article or otherwise.

Section 6.3Right of Claimant to Bring Suit. If a claim under Section 6.1 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 6.4Non-Exclusivity of Rights.  The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or may hereafter acquire under any statute, provision of the certificate of incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.5Other Indemnification.  The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

Section 6.6Insurance. 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.

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Section 6.7Amendment or Repeal.  Any amendment, repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person with respect to any act or omission occurring prior to the time of such amendment, repeal or modification.

ARTICLE VII

CERTIFICATES OF STOCK

Section 7.1Requirements.  Except as otherwise provided by law, every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board or the president or a vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the Corporation.  Any or all such signatures may be a facsimile.  The Corporation shall not issue any stock certificates in bearer form.

Section 7.2Countersignature.  Where a certificate is countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the 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 he or she were such officer, transfer agent or registrar at the date of issue.

Section 7.3Lost Certificates.  The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed.  When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 7.4Transfer 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 7.5Transfers of Stock.  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.

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Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 7.6Stock 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 7.7Record Date.  In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution of allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall be not more than sixty nor less than ten days before the date of such meeting; more than ten days after the date upon which the Board of Directors adopts the resolution fixing the record date for actions by written consent; or more than sixty days prior to any other action.  In no event shall the record date precede the date of adoption of the Board resolution fixing such record date.  If no record date is fixed by the Board of Directors, the record date shall be fixed as provided by statute.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 7.8Registered Stockholders.  The Corporation shall be entitled to recognize the exclusive right of a person registered in its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.1Interested Party Transactions.  In the event of a proposed contract or transaction between the Corporation and one or more of the following (each an “Interested Party”); any (i) officer, (ii) any director, or (iii) any holder of 10% of the corporation’s outstanding stock, or between a corporation and any other corporation partnership, association, or other organization in which one or more Interested Parties are officers, directors, or have a financial interest, the notice for the meeting of the Board of directors at which such contract is to be considered shall identify such contract or transaction, the fact that an Interested Party is involved in the transaction, and the nature and extent of such involvement.  A proposed contract or transaction involving an Interested Party as aforesaid may not be consummated unless it is authorized at a Board meeting at which (a) all material facts as to the contract or transaction and as to the relationship or interest of the Interested Party with respect thereto have been disclosed,

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and (b) a majority of the directors who are not Interested Parties, although less than a quorum, have authorized the contract or transaction following such full disclosure.

Section 8.2Declaration of Dividends.  Dividends upon the capital stock of the corporation, subject to the applicable provisions, if any, of the certificate of incorporation may be declared by the Board of Directors at any regular or special meeting, pursuant to and in accordance with applicable law.  Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 8.3Establishment of Reserve.  Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive as to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 8.4Contracts.  In addition to, and specifically not in limitation of, such authority as may be granted to them under the General Corporation Law of the State of Delaware, as amended from time to time, the Board of Directors may authorize any officer or officers or any agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances.

Section 8.5Checks.  All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

Section 8.6Fiscal Year.  The fiscal year of the Corporation shall end on the 31^st day of December of each year, unless otherwise be fixed by resolution of the Board of Directors.

Section 8.7Seal.  The corporate seal shall have inscribed thereon the words “Corporate Seal, Delaware” and may include the name of the Corporation and the year of its organization.  The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.  The Corporation may adopt for any transaction, without the specific leave of the directors, a seal which is different from its customary and usual seal; and it shall be sufficient in any document requiring the seal of the Corporation if the officer executing such document on behalf of the Corporation, being authorized to do so, writes or prints the word “Seal” or makes some similar mark.

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Section 8.8Voting 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 chief executive officer, or, in his absence, the Chairman of the Board.  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 8.9Inspection of Books and Records.  Any stockholder of record, in person or by attorney or other agent, shall, upon written demand upon oath stating the purpose thereof, have the right during the usual hours of business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business.

Section 8.10Section Headings.  Section headings in these bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 8.11Inconsistent Provisions.  In the event that any provision of these bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the Delaware General Corporation Law or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE IX

AMENDMENTS

Section 9.1Procedure. Subject to the provisions of the Certificate of Incorporation, the Board shall have the power to make, adopt, alter, amend and repeal from time to time these bylaws, subject to the right of the stockholders entitled to vote with respect thereto to adopt, alter, amend and repeal bylaws made by the Board.

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EX-10.48

EXHIBIT 10.48

AMENDED AND RESTATED
MAXWELL TECHNOLOGIES, INC.
1995 STOCK OPTION PLAN

1.Purpose.  The Amended and Restated 1995 Stock Option Plan (the “Plan”) is intended to advance the interests of Maxwell Technologies, Inc. (the “Company”), its shareholders and its subsidiaries by encouraging and enabling selected key employees (including officers and directors), consultants and advisors of the Company and its Subsidiaries upon whose judgment, initiative and effort the Company is largely dependent for the successful conduct of its business to acquire and retain a proprietary interest in the Company by ownership of its stock.  It is intended that the Plan provide the flexibility for the issuance of Options (as hereinafter defined) which qualify as incentive stock options (“incentive stock options”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and options which do not so qualify (“non-qualified stock options”).  Incentive stock options may only be granted to an employee of the Company or any Subsidiary.

2.Definitions

(a)“Agreement” means the agreement between the Company and the optionee under which an Option is granted, and setting forth the terms and conditions of the option and the optionee’s rights thereunder.

(b)“Board” means the Board of Directors of the Company.

(c)“Committee” means, if there shall be a Stock Option Committee (the members of which shall be appointed by the Board from among the directors of the Company who shall satisfy applicable requirements for exemption under Section 16(b) of the Securities Exchange Act of 1934, as amended, and for qualification under Section 162(m) of the Internal Revenue Code of 1986) to which the Board has delegated the authority to administer the Plan, said Stock Option Committee; or if there shall not then be a Stock Option Committee of the Board having such delegated authority, or satisfying the requirements for said Section 16(b) exemption or said Section 162(m) qualification, “Committee” means the Board.

(d)“Common Stock” means the Company’s common stock.

(e)“Date of Grant” means the date on which an Option under the Plan is approved by the Committee.

(f)“Option” means an option granted under the Plan.

(g)“Optionee” means a person to whom an Option, which has not expired, has been granted under the Plan.

(h)“Subsidiary” or “Subsidiaries” means a subsidiary corporation or corporations of the Company as defined in Section 424 of the Code.

(i)“Successor” means the legal representative of the estate of the deceased Optionee or the person or persons who acquire the right to exercise an Option by bequest or inheritance or by reason of the death of any Optionee.

3.Administration of the Plan.  The Plan shall be administered by the Committee.  No Option may be granted to a person who is then a member of the Committee.  The Committee shall have full and final authority in its discretion, subject to the provisions of the Plan, to determine the number of shares and purchase price of Common Stock covered by each Option, the individuals to whom and the time or times at which Options shall be granted and the nature of each Option granted under the Plan, i.e., whether the Option will be an incentive stock option or a non-qualified stock option; to construe and interpret the Plan; to determine the terms and provisions of the respective Agreements, which need not be identical, including, but without limitation, terms covering the payment of the option price, and to make all other determinations and take all other actions deemed necessary or advisable for the proper administration of the Plan.  All such actions and determinations of the Committee shall be conclusively binding for all purposes and upon all persons.

4.Common Stock Subject to Options.  Unless amended in accordance with the provisions of Paragraph 11, and subject to adjustment under the provisions of Paragraph 7, the aggregate number of shares of the Company’s Common Stock which may be subject to Options granted under the Plan shall not exceed 1,990,000.  The shares of Common Stock to be issued upon the exercise of Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan.  In the event any Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under the Plan.

5.Participants.  Options may be granted under the Plan to any person who, in the opinion of the Committee, is a key employee, consultant or advisor of the Company or any Subsidiary, or any person who has been hired by the Company or any Subsidiary and who the Committee determines will become a key employee upon formal commencement of employment.

6.Terms and Conditions of Options.  Any Option granted under the Plan shall be evidenced by an Agreement executed by the Company and the Optionee and shall contain such terms and be in such form as the Committee may from time to time approve, subject to the following limitations and conditions:

(a)Option Price.  The option price per share with respect to each Option shall be determined by the Committee but shall in no instance be less than 100% of the fair market value of a share of the Common Stock on the Date of Grant, provided that with respect to an Optionee who owns, at the time of grant of an Option which is an incentive stock option, more than ten percent of the total combined voting power of all classes of stock of the Company, the option price per share of such Option shall be at least 110% of the fair market value of the underlying shares.  For the purposes hereof, fair market value shall be as determined by the Committee and such determination shall be binding upon the Company and upon the Optionee.  The Committee may make such determination (i) in case the Common Stock shall not then be listed and traded upon a recognized securities exchange, upon the basis of the mean between the closing bid and asked quotations for such stock (or the closing selling price for such stock, if applicable) on the Date of Grant (as reported by a newspaper of general circulation or a recognized stock quotation service) or, in the event that there shall be no bid or asked quotations (or reported closing selling price) on the Date of Grant, then upon the basis of the mean between the closing bid and asked quotations (or the closing selling price, as the case may be,) on the date nearest preceding the Date of Grant or (ii) in case the Common Stock shall then be listed and traded upon a recognized securities exchange upon the basis of the closing selling price at which shares of the Common Stock were traded on such recognized securities exchange on the Date of Grant or, if the Common Stock was not traded on said date, upon the basis of the closing selling price on the date nearest preceding the Date of Grant, and (iii) upon any other factors which the Committee shall deem appropriate.

(b)Period of Option.  Except for earlier termination as provided in Subparagraphs (g) and (h) of this Paragraph 6, and in Subparagraph (b) of Paragraph 7, the expiration date of each Option shall be fixed by the Committee, but, notwithstanding any provision of the Plan to the contrary, (i) with respect to an incentive stock option, such expiration date shall not be more than ten years from the Date of Grant or, with respect to incentive stock options granted to an employee who owns more than ten percent of the outstanding stock of the Company, not more than five years from the Date of Grant, and (ii) with respect to a non-qualified stock option, such expiration date shall not be more than eleven years from the Date of Grant.

(c)Vesting of Shareholder Rights.  Neither an Optionee nor any successor shall have any of the rights of a shareholder of the Company until the Option with respect to the applicable shares shall have been duly exercised and the certificate evidencing such shares delivered to such Optionee or any successor.

(d)Exercise of Option.  Each Option shall be exercisable in such amounts and at such respective dates prior to the expiration of the Option as provided in the Agreement.

(e)Payment of Option Price.  Upon exercise of an Option, Optionee or Successor shall pay the option price by delivering to the Company:

(i)cash or a check payable to the Company in an amount equal to the option price;

(ii)a stock certificate or certificates, duly endorsed for transfer to the Company, representing shares of Common Stock of the Company owned by the Optionee or Successor which have a fair market value on the date of exercise equal to the option price; or

(iii)cash or a check payable to the Company and a stock certificate or certificates, duly endorsed for transfer to the Company, representing shares of Common Stock owned by the Optionee or Successor, which, when added to the amount of the cash or check, have a fair market value on the date of exercise equal to the option price.

For the purposes hereof, fair market value shall be determined by the Committee and such determination shall be binding upon the Company and upon the Optionee or Successor.  The Committee may make such determination in accordance with Paragraphs 6(a)(i) and 6(a)(ii) hereof by substituting “date of exercise” for “Date of Grant” each time the latter appears therein and upon any other factors which the Committee shall deem appropriate.

(f)Non-Transferability of Option.  No Option shall be transferable or assignable by an Optionee, otherwise than by will or the laws of descent and distribution and each Option shall be exercisable during the Optionee’s lifetime only by the Optionee.  No Option shall be pledged or hypothecated in any way and no Option shall be subject to execution, attachment or similar process.

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(g)Termination of Employment.  Upon termination of an Optionee’s employment or in the case of a consultant or advisor, consulting or advisory arrangement, with the Company and its Subsidiaries other than by reason of the death of the Optionee, the Option privileges of such Optionee shall be limited to the shares which were immediately purchasable by him at the date of such termination and such Option privilege shall expire unless exercised by him within sixty (60) days after the date of such termination.  The granting of an Option to any person shall not alter in any way the Company’s or the Subsidiary’s right to terminate such person’s employment or in the case of a consultant or advisor, consulting or advisory arrangement, as the case may be, with the Company or any Subsidiary at any time for any reason, nor shall it confer upon the Optionee any rights or privileges except as specifically provided for in the Plan.  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.

(h)Death of Optionee.  If an Optionee dies while an employee, consultant or advisor of the Company or any Subsidiary, the option privileges of said Optionee shall be limited to the shares which were immediately purchasable by such Optionee at the date of death and such option privileges shall expire unless exercised by said Optionee’s successor within one (1) year after the date of death.

(i)Maximum Number of Shares.  The maximum number of shares of Common Stock that may be subject to options granted to any one eligible individual is the total number of shares authorized for grant of options under Paragraph 4 of the Plan.

7.Adjustments.

(a)In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Board in the number, kind and exercise price of shares for the purchase of which Options have theretofore been or may thereafter be granted under the Plan.

(b)In the event that the Company shall determine to merge, consolidate or enter into any other reorganization with or into any other corporation, or in the event of any dissolution or liquidation of the Company, then in any such event, at the election of the Board, (i) appropriate adjustment shall be made by the Board in the number, kind and exercise price of shares for the purchase of which Options have theretofore been and/or may thereafter be granted under the Plan, or (ii) the Plan and any Options theretofore granted under the Plan shall terminate as of the date of such merger, consolidation, reorganization, dissolution or liquidation, provided that written notice of such event shall have been given to each Optionee not less than 30 days prior to the date of such event.  Upon any election by the Board pursuant to the provisions of clause (ii) of this Subparagraph (b), each Optionee shall have the right during the period commencing on the date the notice referred to in said clause (ii) is given and concluding on the date of such merger, consolidation, reorganization, dissolution or liquidation, as the case may be, to exercise such Optionee’s outstanding and unexercised Options, including shares as to which such Options would not otherwise have been exercisable by reason of an insufficient lapse of time.

(c)All adjustments and determinations under this Paragraph 7 shall be made by the Board, whose decisions as to what adjustments or determinations shall be made, and the extent thereof, shall be final, binding and conclusive.

8.Dollar Limitation on Incentive Stock Options.  To the extent that the aggregate fair market value (determined as of the Date of Grant) of Common Stock with respect to which Options intended to be incentive stock options first become exercisable by an Optionee during any calendar year (under the Plan and all other stock option plans of the Company or any subsidiary) exceeds $100,000, such Options shall not be considered incentive stock options.  Such $100,000 limit shall be applied by taking Options into account in the order in which they were granted.

9.Restrictions on Issuing Shares.  The exercise of each Option shall be subject to the condition that if at any time the Company shall determine in is discretion that (i) the satisfaction of withholding tax or other withholding liabilities, or (ii) the listing, registration or qualification of any shares otherwise deliverable upon such exercise upon any securities exchange or under any state or federal law, or (iii) the consent or approval of any regulatory body, or (iv) the perfection of any exemption from any such withholding, listing, registration, qualification, consent or approval is necessary or desirable as a condition of, or in connection with, such exercise or the issuance, delivery or purchase of shares thereunder, then in any such event, such exercise shall not be effective unless such withholding, listing registration, qualification, consent, approval or exemption shall have been effected, obtained or perfected free of any conditions not acceptable to the Company.

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10.Use of Proceeds.  The proceeds received by the Company from the sale of its Common Stock pursuant to the exercise of Options granted under the Plan shall be added to the Company’s general funds and used for general corporate purposes.

11.Amendment, Suspension and Termination of the Plan.  The Board may at any time suspend or terminate the Plan or may amend it from time to time in such respects as the Board may deem advisable in order that the Options granted thereunder may conform to any changes in the law or in any other respect which the Board may deem to be in the best interests of the Company; provided, however, that without approval by the shareholders of the Company, no such amendment shall (a) except pursuant to Paragraph 7, increase the maximum number of shares for which Options may be granted under the Plan, (b) change the provisions of Subparagraph (a) of Paragraph 6 relating to the establishment of the Option price, (c) change the provisions of Subparagraph (b) of Paragraph 6 relating to the expiration date of each option or (d) change the provisions of the second sentence of this Paragraph 11 relating to the term of this Plan.  Unless the Plan shall theretofore have been terminated by the Board or as provided in Paragraph 12, the Plan shall terminate ten (10) years after the effective date of the Plan.  No Option may be granted during any suspension or after the termination of the Plan.  Except as otherwise provided in the Plan, no amendment, suspension or termination of the Plan shall, without an Optionee’s consent, alter or impair any of the rights or obligations under any Option theretofore granted to such Optionee under the Plan.

12.Effective Date of the Plan and Shareholder Approval.  The effective date of the Plan shall be the date of its approval by the Board of Directors of the Company; provided, however, that in the event that shareholder approval of the Plan is not secured on or before October 24, 1996, the Plan shall thereupon terminate.  Any Options granted prior to the aforesaid shareholder approval being secured shall be subject to such approval being secured.

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EX-10.49

Exhibit 10.49

SEPARATION AGREEMENT AND GENERAL

RELEASE OF ALL CLAIMS

                                This Separation Agreement and General Release of All Claims (“Agreement”) is made by and between Kenneth Potashner (“Director”) on the one hand, and Maxwell Technologies, Inc. (“the Company”) on the other.  (Collectively, Director and the Company shall be referred to as “the Parties.”)

1.             Director has served as an employee of the Company and as a member of the Board of Directors of the Company. As of May 8, 2003 (the “Effective Date”), Director served only as a member of the Board of Directors of the Company, and on such date resigned from the Company Board of Directors.  From the Effective Date until May 8, 2007 (the “End Date”), Director will be available from time to time as reasonably requested for consultation with the Chief Executive Officer of the Company regarding the Company’s business operations.  The Company is prepared to provide Director the benefits provided herein in exchange for such consulting services and the other terms and conditions of this Agreement, and the Director is prepared to enter into this Agreement in exchange for such benefits.  This Agreement will also resolve any and all differences related to Director’s prior employment with the Company and service as a member of the Board of Directors and/or the cessation of that employment and service and any known or unknown claims between the Parties.  For these reasons, the Parties have entered into this Agreement.

2.             In consideration of Director’s consulting services and other agreements under this Agreement, Director shall receive fully vested stock options to purchase 94,251 shares of the Company’s common stock at $6.18 per share.   Such stock options will be issued pursuant to the standard terms and conditions of the 1995 Stock Option Plan and the related grant agreement (other than a vesting schedule which will not apply).  In accordance with the terms of the 1995 Stock Option Plan and the agreement covering such stock options, Director will have a 60-day period following the End Date to exercise any such options or they will expire. Director hereby acknowledges and agrees that, except for the stock options granted pursuant to this paragraph 2, Director has surrendered (and has no rights to) any and all other stock options to purchase shares of stock of the Company or any of its subsidiaries.

3.             In consideration of and in return for the promises and covenants undertaken herein by the Company, including the grant of the stock options under paragraph 2 herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, Director does hereby acknowledge full and complete satisfaction of and does hereby release, absolve and discharge the Company and the Company’s parents, subsidiaries, affiliates, employees, related companies and business concerns, past and present, and each of them, as well as each of their partners, trustees,

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directors, officers, agents, attorneys, servants and employees, past and present, and each of them (hereinafter collectively referred to as “Releasees”) from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, grievances, wages, vacation payments, severance payments, obligations, commissions, overtime payments, debts, expenses, damages, judgments, orders and liabilities of whatever kind or nature in state or federal law, equity or otherwise, whether known or unknown to Director which Director now owns or holds or has at any time owned or held as against Releasees, or any of them, including specifically but not exclusively and without limiting the generality of the foregoing, any and all claims, demands, grievances, agreements, obligations and causes of action, known or unknown, suspected or unsuspected by Director:  (1) arising out of Director’s prior employment with the Company or service as a member of the Board of Directors or the ending of that employment and service; or (2) arising out of or in any way connected with any claim, loss, damage or injury whatever, known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of the Releasees, or any of them, committed or omitted on or before the Effective Date.  Also without limiting the generality of the foregoing, Director specifically releases the Releasees from any claim for attorneys’ fees and/or costs of suit.  DIRECTOR SPECIFICALLY AGREES AND ACKNOWLEDGES DIRECTOR IS WAIVING ANY RIGHT TO RECOVERY BASED ON STATE OR FEDERAL AGE, SEX, PREGNANCY, RACE, COLOR, NATIONAL ORIGIN, MARITAL STATUS, RELIGION, VETERAN STATUS, DISABILITY, SEXUAL ORIENTATION, MEDICAL CONDITION, OR OTHER ANTI-DISCRIMINATION LAWS, INCLUDING, WITHOUT LIMITATION, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AGE DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT AND THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, OR BASED ON THE DIRECTOR RETIREMENT INCOME SECURITY ACT, ALL AS AMENDED, WHETHER SUCH CLAIM BE BASED UPON AN ACTION FILED BY DIRECTOR OR BY A GOVERNMENTAL AGENCY.

4.             It is the intention of Director in executing this Agreement that it shall be effective as a bar to each and every claim, demand, grievance and cause of action hereinabove specified.  In furtherance of this intention, Director hereby expressly waives any and all rights and benefits conferred upon Director by the provisions of Section 1542 of the California Civil Code and expressly consents that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified.  Section 1542 provides:

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                                “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

                                Having been so apprised, Director nevertheless hereby voluntarily elects to and does waive the rights described in Civil Code Section 1542 and elects to assume all risks for claims that now exist in Director’s favor, known or unknown, that are released under this Agreement.

5.             The Company expressly denies any violation of any federal, state or local statute, ordinance, rule, regulation, policy, order or other law.    Nothing contained herein is to be construed as an admission of liability on the part of the parties hereby released, or any of them, by whom liability is expressly denied.  Accordingly, while this Agreement resolves all issues regarding the Company referenced herein, it does not constitute an adjudication or finding on the merits of any allegations and it is not, and shall not be construed as, an admission by the Company of any violation of federal, state or local statute, ordinance, rule, regulation, policy, order or other law, or of any liability.  Moreover, neither this Agreement nor anything in it shall be construed to be or shall be admissible in any proceeding as evidence of or an admission by the Company of any violation of any federal, state or local statute, ordinance, rule, regulation, policy, order or other law, or of any liability.  This Agreement may be introduced, however, in any proceeding to enforce the Agreement.

6.             Without regard to any other provision of this Agreement, Company acknowledges and agrees that this Agreement shall not reduce or terminate Director’s rights to indemnification, defense, exoneration, and to be held harmless from any claims or actions now pending or brought against him at any time in the future with regard to Director’s activities as an employee, officer or director of the Company or any affiliate of the Company or as the designee or nominee of the Company or any affiliate of the Company, to the extent such rights are created by law, by the charter documents or bylaws of the Company or by any resolutions of the shareholders or board of directors of the Company or any committee thereof, or pursuant to any directors and officers insurance policy or errors and omissions insurance policy or other liability insurance policy or program covering the Company, any of its affiliates, or any of its officers, directors, employees or agents (except for any such reduction or termination that is applicable generally to the officers, directors, employees or agents of the Company).  Company further agrees not to reduce, terminate, non renew or rescind any such insurance or indemnification rights, policies or programs with regard to Director except for any such reduction, termination, non renewal or rescission that is applicable generally to the officers, directors, employees or agents of the Company.

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7.             Director acknowledges that during Director’s prior employment and service as a member of the Board of Directors, Director had access to trade secrets and confidential information about the Company, including but not limited to the Company’s products and services, research and development of new products and services, customers, and methods of doing business.  Director agrees that Director shall not disclose any information constituting the trade secrets or confidential information of the Company or its customers that has not been disclosed to the general public prior to that time.

8.             Each party expressly agrees that such party will not in any way disparage or otherwise cause to be published or disseminated any negative statements, remarks, comments or information regarding the other party.

9.             This Agreement shall be construed in accordance with, and be deemed governed by, the laws of the State of California.

10.           The Parties hereto acknowledge each has read this Agreement, that each fully understands its rights, privileges and duties under the Agreement, and that each enters this Agreement freely and voluntarily.  Each party further acknowledges each has had the opportunity to consult with an attorney of its choice to explain the terms of this Agreement and the consequences of signing it.

11.           Within three calendar days of signing and dating this Agreement, Director shall deliver the executed original of the Agreement to Richard Balanson, Chief Executive Officer, Maxwell Technologies, Inc., 9244 Balboa Avenue, San Diego, California  92123.  However, Director acknowledges that Director may revoke this Agreement for up to seven (7) calendar days following Director’s execution of this Agreement and that it shall not become effective or enforceable until the revocation period has expired.  Director acknowledges that such revocation must be in writing addressed to Richard Balanson, Chief Executive Officer, Maxwell Technologies, Inc., 9244 Balboa Avenue, San Diego, California  92123, and received not later than midnight on the seventh day following execution of this Agreement by Director.  If Director revokes this Agreement under this paragraph, the Agreement shall not be effective or enforceable and Director will not receive the benefits described in paragraph 2 above.

12.           If Director does not revoke this Agreement in the time frame specified in the preceding paragraph, the Agreement shall be effective at 12:01 a.m. on the eighth day after it is signed by Director.

13.           If litigation or any other legal proceeding is instituted to interpret or enforce this Agreement, the prevailing party in that litigation or other legal proceeding shall be entitled to reasonable attorneys’ fees and costs in addition to any other relief granted.

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I have read the foregoing Separation Agreement and General Release of All Claims and I accept and agree to the provisions contained therein and hereby execute it voluntarily and with full understanding of its consequences.

PLEASE READ CAREFULLY.  THIS AGREEMENT

CONTAINS A GENERAL RELEASE OF ALL KNOWN AND

UNKNOWN CLAIMS.

Date:  May 23, 2003

/s/ Kenneth Potashner

Kenneth Potashner

Date:  May 21, 2003

Maxwell Technologies, Inc.

By:	/s/ Richard Balanson
	Richard Balanson
	Chief Executive Officer

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EX-10.50

Exhibit 10.50

MAXWELL TECHNOLOGIES, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made as of this 1st day of August, 2003, by and between MAXWELL TECHNOLOGIES, INC. a Delaware corporation, (“Company”) and RICHARD BALANSON (“Executive”).  The parties agree with each other as follows:

1.             Term of Employment.  Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to employ Executive, and Executive agrees to be employed by the Company, for the period commencing on the date of this Agreement and ending on the first to occur of (i) the date on which Executive first qualifies for or elects to receive retirement benefits in accordance with the Company’s normal retirement policies and (ii) the date on which this Agreement is terminated by either the Company or Executive pursuant to any subsection of Section 4 hereof.

2.             Duties of Executive.

(a)           Executive shall serve as the President and Chief Executive Officer of the Company.  In such capacities, Executive shall report to the Board of Directors of the Company (the “Board”) and Executive shall perform the duties and render the services for and on behalf of the Company associated with the positions he shall hold and as may be set forth from time to time in resolutions of, or other directives issued by, the Board.

(b)           Executive agrees to perform such duties and render such services to the best of his ability, devoting thereto his entire professional time, attention and energy exclusively to the business and affairs of the Company and its affiliates, as its business and affairs now exist and as they hereafter may be changed, and shall not during the term of his employment hereunder be engaged in any other business activity, whether or not such business activity is pursued for gain or profit; provided, however, that Executive may serve (i) on civic or charitable boards or committees and (ii) with the prior written approval of the Board, boards of corporations or business enterprises, in each case so long as such activities do not interfere with the performance of Executive’s obligations under this Agreement.

(c)           The Company agrees that Executive shall be included in the slate of nominees proposed by the Board in the Company’s proxy statements delivered to its shareholders for election to the Board for as long as this Agreement is in effect.

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

(a)           Base Salary.  Effective as of the date of this Agreement, Executive shall be paid a base salary at the initial annual rate of $325,000, payable in installments consistent with the Company’s payroll practices, and subject to normal withholding.  Executive’s base salary shall be reviewed annually prior to each anniversary of this

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Agreement by the Board or its Compensation Committee and if the Board or Committee determines, in its discretion, that Executive’s base salary is to be increased, such increase shall be effective as of such anniversary date;

(b)           Annual Bonus.  Executive shall be entitled to an annual bonus which shall be determined as provided in this subsection (b):

(i)            Commencing with the Company’s current fiscal year ending December 31, 2003 and for each subsequent fiscal year of the Company, the Board will set specific financial performance targets and the amount of Executive’s bonus will range $0 to a maximum amount equal to 50% of Executive’s annual base salary as in effect for such fiscal year (with a target bonus of 50% of the then effective base salary) depending on the Board’s determination of Executive’s success in achieving the specified targets. The financial performance targets for fiscal year 2003 were established in January 2003 as part of the Company’s annual financial plan.

(ii)           The bonus payable to Executive for each fiscal year, if any is due, shall be paid to Executive, subject to normal withholding, promptly after the completion of the audit of the Company’s financial statements for such fiscal year.

(c)           Options.  Executive is eligible for, and has received, the grant of stock options under the Company’s stock option programs. The Board or its Stock Option Committee will from time to time consider making additional grants to Executive, but the Company shall not be obligated to make any particular grant or grants thereof.

(d)           Benefits.  Executive shall be entitled to participate in the Company’s insurance, health, life insurance, long term disability, dental and medical, and automobile programs as the same may exist from time to time on the terms and conditions applicable to other 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 Executive for the reasonable cost of an annual physical examination, if Executive elects to have the same.  If Executive elects not to participate in the Company’s medical benefits program, then Executive may elect to have the Company maintain a life insurance policy for the Executive and naming as designee as beneficiary with an annual premium paid by the company equal or less than the annual premium the Company would have paid for the Executive to be covered under the Company’s medical benefits, which currently is approximately $ 8,400 per annum.

 (e)          Vacation.  Executive shall be entitled to four weeks vacation per year.  Such vacation shall be taken at such times as the Company and Executive shall mutually agree, acting reasonably, having regard to the performance of Executive’s essential duties to the Company pursuant to the terms of this Agreement.  Executive may accumulate unused vacation time from year to year to the extent permitted under the Company’s vacation policy for executives as in effect from time to time.

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(f)            Expenses.  Executive 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.

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

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

(ii)           if Executive commits a material breach or material non-observance of any of the terms or conditions of this Agreement provided that Executive 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 Executive is convicted of a felony; or

(iv)          if Executive refuses or fails to implement any reasonable directive issued by the Company’s Board of Directors and Executive fails to remedy the refusal or failure within 15 days of receipt of written notice thereof; or

(v)           if Executive 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 Executive’s employment pursuant to this Subsection (a), this Agreement and the employment of Executive hereunder shall be wholly terminated.  Upon any such termination, Executive shall have no claim against the Company in respect of his employment for damages or otherwise except in respect of payment of base salary earned, due and owing and unused vacation time to the date of termination.

(b)           Termination by the Company Without Cause.  Notwithstanding anything herein to the contrary, the Company may terminate Executive’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 Subsection (b), Executive will be paid an amount equal to Executive’s annual base salary in effect on the date of such termination of employment. Such amount will be paid in equal monthly installments following the date of termination of employment.

In addition, notwithstanding anything to the contrary contained herein or in the applicable stock option agreements, all of the stock options then held by Executive shall

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continue to vest in accordance with their terms until the first anniversary of the date the Company terminates Executive’s employment under this subsection (b) and shall be exercisable to the extent so vested by Executive on or prior to the 60^th day following such first anniversary date of termination

(c)           Termination by Executive.  Executive may terminate his employment hereunder at any time, for any reason, upon the giving of not less than 30 days’ prior written notice to the Board.  In the event of termination by Executive under this clause (c), Executive shall be entitled to receive only his base salary and unused vacation time due him through the effective date of termination.  Upon the termination of Executive’s employment pursuant to this Subsection (a), this Agreement and the employment of Executive hereunder shall be wholly terminated.  Upon any such termination, Executive shall have no claim against the Company in respect of his employment for damages or otherwise except in respect of payment of base salary earned, due and owing and unused vacation time to the date of termination.

(d)           Termination by the Company Due to Death or Disability.  The employment of Executive 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 Executive or his legal representative.  In the event of termination under this clause (d), in addition to any disability benefit coverage to which he may be entitled under any disability insurance programs maintained by the Company in which he is a participant, Executive will be paid an amount equal to six months salary at Executive’s annual base salary rate as in effect on the date of the termination under this clause (d). Except as provided in the preceding sentence, Executive shall be entitled to no additional compensation under this Agreement following the date of termination under this clause (d), other than base salary earned but not paid, and unused vacation time accrued, 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 Executive’s control which makes Executive incapable of discharging his duties or obligations hereunder, or causes Executive 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)           Termination by Executive Upon a Change of Control.  In the event that (x) a Change of Control (as hereinafter defined) occurs and (y) at any time prior to the third anniversary of such Change of Control a Triggering Event (as hereinafter defined) shall occur, then unless the Executive shall have given his express written consent to the contrary, Executive may, upon 30 days written notice to the Company, terminate his employment hereunder (subject, within the first six (6) months immediately following a change of control, to Executive offering to provide up to six (6) months of transition services for compensation equal to the same salary and benefits in effect at the time of the change of control).  In such event Executive shall be entitled to the following:

(i)            Following the date of the Triggering Event, Executive shall be paid  two cash payments, each to be equal to Executive’s annual base salary in effect on the date of the Triggering Event, with the first of such payment to be paid within 30 days of

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the Triggering Event and the second of such payments to be paid on the first anniversary of the date of the Triggering Event, in each case subject to normal withholding.

(ii)           As of the date of the Triggering Event, notwithstanding the vesting schedule of any stock options then held by Executive, all stock options then held by Executive shall thereupon become fully vested; and

(iii)          For a one year period following the date of the Triggering Event, Executive shall be provided with employee benefits substantially identical to those to which Executive was entitled immediately prior to the Triggering Event, subject to any changes or modifications (including reductions or terminations) to the Company’s employee benefit and welfare plans that are made generally for all of the Company’s senior executives.

In the event that the benefits provided for in this Subsection 4(e) to be paid Executive constitute “parachute payments” within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and will be subject to the excise tax imposed by Section 4999 of the Code, then Executive shall receive (a) a payment from the Company sufficient to pay such excise tax and (b) an additional payment from the Company sufficient to pay the Federal and California income tax arising from the payment made under clause (a) of this sentence.  Unless the Company and Executive otherwise agree, the determination of Executive’s excise tax liability and the Federal and California income tax resulting from the payment under clause (a) above shall be made by the Company’s independent accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Company and Executive for all purposes.   For purposes of making the calculations required by this Subsection 4(e), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on interpretations of the Code for which there is a “substantial authority” tax reporting position.  The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make the determinations required by this Subsection 4(e).  The Company shall bear the expenses of the Accountants under this Subsection 4(e).

For purposes of this Subsection 4(e):

(a)           Change of Control” means the occurrence of any one of the following:    (i) any transaction or series of transactions (as a result of a tender offer, merger, consolidation or otherwise) that results in any person, entity or group acting in concert, acquiring “beneficial ownership” (as defined in rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of such percentage of the aggregate voting power of all classes of common equity stock of the Company as shall exceed 50% of such aggregate voting power; or (ii) a merger or consolidation of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the voting power represented by the voting securities of the Company or such entity outstanding immediately after such merger or consolidation; or (iii) the

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shareholders approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all, or substantially all, of the Company’s assets (other than in connection with a sale or disposition to subsidiaries of the Company or in connection with a reorganization or restructuring of the Company); or (iv) there occurs a change in the composition of the Board as a result of which fewer than a majority of the directors are Incumbent Directors (as hereinafter defined).  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the Commencement Date or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors casting votes at the time of such election or nomination.

(b)           “Triggering Event” means any of the following: (i) the termination by the Company without Cause of Executive’s employment pursuant to Subsection 4(a) hereof; (2) the reduction of Executive’s annual base salary or annual incentive bonus formula from that in effect on the date of the Change of Control; (3) the removal of Executive as the Company’s President and Chief Executive Officer or a reduction in his duties and responsibilities; or (4) the relocation of Executive’s principal place of employment to a location outside San Diego County, California.

(f)            Payments.  Any amounts payable to Executive under this Section 4 shall be paid, unless otherwise specified hereunder, within 30 days of the date the payment obligation accrues and shall be subject to normal withholding.

(g)           Exclusive Rights.  In connection with any termination under Subsection 4(b) or 4(e), Executive 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 Subsections.

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

5.             Resolution of Disputes.  The parties recognize that claims, controversies and disputes may arise out of this Agreement with respect to Executive’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 best efforts to resolve such dispute informally, between them.  In the event that any such claim, controversy or dispute between Company and Executive 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.

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;

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provided, however, that nothing in this Section 5 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.

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.

6.             General Obligations of Executive.

(a)           Executive 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)           Executive 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, as is in effect from time to time.

7.             No Solicitation.  Executive 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 Executive participated actively in the recruiting of such individual.

8.             Noncompetition.  Executive agrees that for a period of one year following termination of his employment with the Company for any reason, he will not, nor will he permit any entity or other person under his control to, directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected with or have any interest in, as a shareholder, director, officer, employee, agent, consultant, partner, creditor or otherwise, any business or activity which is competitive with any business or activity engaged in by the Company or any of its subsidiaries or affiliates anywhere within (i) the State of California, or (ii) any other state of the United States and the District of Columbia in which the Company engages in or has engaged in business during the past five years.

9.             Entire Agreement.  This Agreement constitutes the entire Agreement between the parties and contains all agreements between them with the exception of the 1995 Stock Option

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Plan (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 the date of this Agreement signed by Executive, 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 9, this Agreement also supersedes any and all other agreements and contracts whether verbal or in writing relating to the subject matter hereof.

10.           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 Board on behalf of the Company and by Executive.

11.           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.

12.           Binding Nature.  Executive’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 inure to the benefit of, and be enforceable by, any purchaser of substantially all of the Company’s assets, any corporate successor to the Company or any assignee thereof.

13.           Assistance in Litigation.  Executive 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 Executive is a named defendant, Executive shall be paid a reasonable hourly fee to be mutually agreed upon.

14.           Indemnification.  The Company shall indemnify Executive in accordance with its standard indemnification policy for offices and directors of the Company and as required by applicable law.

15.           No Duty to Mitigate.  Executive 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 Executive may receive from any other source not paid for by the Company.

16.           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 Sections 7 and 8 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.

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17.           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 Executive to:

Richard Balanson

If to the Company to:

Maxwell Technologies Inc.

9244 Balboa Avenue

San Diego, California  92123

Attn:  Chairman of the Board

Telephone:  (858) 503-3300

Fax:  (858) 503-3301

18.           Injunctive Relief.  The Company and Executive agree that a breach of any term of this Agreement by Executive 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 Executive’s duties or responsibilities hereunder.

19.           Release.  If Executive’s employment hereunder shall terminate under Subsection 4 (b) or 4(e), Executive agrees, as a condition to his entitlement to receive the amounts specified in such Subsections to be due to him, to execute and deliver to the Company a release in the form attached hereto as Exhibit A.  Such release shall be delivered by Executive at the time of termination, but shall become effective only after Executive has received all payments specified in this Agreement to be due to him from the Company in respect of his termination.

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20.           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 1st day of August, 2003.

“Company”

MAXWELL TECHNOLOGIES, INC.

By: /s/ Mark Rossi

“Executive”

/s/ Richard Balanson

Richard Balanson

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

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 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 11, 2003	/s/  RICHARD D. BALANSON
		Richard D. Balanson
		Chief ExecutiveOfficer

EX-31.2

Exhibit 31.2

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

I, James A. Baumker, certify that:

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

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2003	/s/   JAMES A. BAUMKER
Date	Signature
	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section1350

Solely for the purposes of complying with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Maxwell Technologies, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the Quarter ended June 30, 2003 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 11, 2003	/s/ Richard D. Balanson
Date	Richard D. Balanson, President and Chief Executive Officer

August 11, 2003	/s/ James A. Baumker
Date	James A. Baumker, Vice President and
	Chief Financial Officer