MAXWELL
TECHNOLOGIES, INC.

EMPLOYMENT AGREEMENT


          This
Employment Agreement (the “Agreement”) is made as of this 22nd day of December, 2003, by and
between MAXWELL TECHNOLOGIES, INC. a Delaware corporation, (“Company”) and
Richard Smith, EVP of Maxwell Technologies (“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 Executive Vice President and head of Strategic Business
 Development of the Company. In such capacities, Executive shall report to the
 CEO of the Company 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 CEO

	
  
	
  

	
  
	
             (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.




          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 $200,000, 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 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; the temporary reduction of
 compensation 















	
  
	
 for 2004, is both voluntary and not applicable to
 any severance or other compensation described in this contract.

	
  
	
  

	
  
	
             (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 CEO’s determination of Executive’s success in
 achieving the specified targets. The financial performance targets for fiscal
 year 2004 will be established in January 2004 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
 (e)          Vacation.  Executive shall be entitled to vacation
 according to the prevailing rules in effect during this employment
 contract.  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.

	
  
	
  

	
  
	
             (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.




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          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 one
  half of Executive’s annual base salary in effect on the date of such
  termination of employment with the exception noted above for the voluntary
  2004 pay reduction. 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 continue to vest in accordance with their terms until the six
  month 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 60th day following such anniversary
  date of termination




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             (c)          Termination
 by Executive.  Executive may
 terminate his employment hereunder at any time, for any reason, upon the
 giving of not less than 15 days’ prior written notice to the CEO. 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 CEO.

	
  
	
  

	
  
	
             (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 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 one half of the 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 the Triggering Event and the second of such payments
 to be paid on the six month 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




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                           (iii)        For
 a six months 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:  (1) 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 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 




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 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 Executive Vice President and head of Strategic
 Business Development 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; 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 


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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.          Non-competition.  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 Plan (and
any stock option agreements issued there under) 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 

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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 CEO
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.


          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 

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proper postage prepaid
and addressed to the party or parties to be notified, at the following
addresses:

	
  
	
 If to Executive to:

	
  
	
  

	
  
	
 Richard Smith

	
  
	
 Telephone: (619) 222-6830

	
  
	
  

	
  
	
 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 22
day of December, 2003 

	
  
	
 “Company” 

	
  
	
  

	
  
	
 MAXWELL TECHNOLOGIES, INC.

	
  
	
  

	
  
	
 By:
	
   /s/  RICHARD BALANSON

	
  
	
  
	
 



 	
  

	
  
	
  

	
  
	
 Richard Balanson

	
  
	
  
	
  

	
  
	
  
	
   /s/  RICHARD SMITH

	
  
	
 

 	
  

	
  
	
 Richard Smith




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