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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Pursuant to §240.14a-12

Maxwell Technologies, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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MAXWELL TECHNOLOGIES, INC.

5271 Viewridge Court, Suite 100

SAN DIEGO, CALIFORNIA 92123

March 30, 2012

To Our Stockholders:

It is my pleasure to invite you to attend the 2012 Maxwell Technologies, Inc. Annual Meeting of Stockholders (“Annual Meeting”) to be held on May 9, 2012 at 11:00 a.m., PDT, at the Courtyard Marriott Hotel located at 8651 Spectrum Center Boulevard, San Diego, California 92123.

Details of the business to be conducted at the Annual Meeting are given in the attached Notice of the 2012 Annual Meeting of Stockholders and Proxy Statement, which you are urged to read carefully.

We hope you will be able to attend the Annual Meeting to listen to a discussion of Maxwell’s 2011 performance and the outlook for this year, and answer any questions you may have.

We are pleased to take advantage of the Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders on the Internet. We believe these rules will allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On or about March 30, 2012, we expect to begin mailing to our stockholders an Important Notice Regarding the Availability of Proxy Materials containing instructions on how to access our Proxy Statement and Annual Report and vote online.

Whether you plan to attend the Annual Meeting or not, it is important that your shares are represented. Therefore, when you have finished reviewing the Proxy Statement, you are urged to promptly vote in accordance with the instructions set forth on the Proxy Card you received. This will ensure your proper representation at the Annual Meeting, whether or not you can attend.

If you have any questions concerning the Annual Meeting or the proposals being voted on, please contact our Investor Relations Department at (858) 503-3300.

Sincerely,

David J. Schramm Chief Executive Officer

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NOTICE OF THE 2012 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 9, 2012

To the Stockholders of

Maxwell Technologies, Inc.:

The 2012 Annual Meeting of Stockholders (the “Annual Meeting”) of Maxwell Technologies, Inc., a Delaware corporation (the “Company”), will be held on May 9, 2012 at 11:00 a.m., PDT, at the Courtyard Marriott Hotel located at 8651 Spectrum Center Boulevard, San Diego, California 92123, for the purpose of considering and voting upon the following:

The foregoing business items are more fully described on the following pages, which are made part of this notice.

WHO MAY VOTE:

The Board of Directors has fixed the close of business on March 16, 2012 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof.

By Order of the Board of Directors,

Kevin S. Royal Secretary

March 30, 2012

San Diego, California

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE AS SOON AS POSSIBLE. IF YOU HAVE INTERNET ACCESS, WE ENCOURAGE YOU TO VOTE VIA THE INTERNET. FOR FURTHER DETAILS, SEE “QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND THE ANNUAL MEETING”.

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MAXWELL TECHNOLOGIES, INC.

5271 Viewridge Court, Suite 100

SAN DIEGO, CALIFORNIA 92123

(858) 503-3300

PROXY STATEMENT

FOR MAXWELL TECHNOLOGIES

2012 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 2012

INTERNET AVAILABILITY OF PROXY MATERIALS

Under rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about March 30, 2012, we will mail to our stockholders an Important Notice Regarding Availability of Proxy Materials (“Notice”) containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report. The Notice also instructs you on how to access your Proxy Card to vote through the Internet or by telephone.

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting, and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail until you elect otherwise. If you have previously elected to receive printed proxy materials, you will continue to receive these materials in paper format until you elect otherwise.

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QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND THE ANNUAL MEETING:

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GENERAL INFORMATION

The Board of Directors of Maxwell Technologies, Inc., a Delaware corporation (the “Company,” “Maxwell,” “we” or “us”), is soliciting the enclosed proxy for use at the 2012 Annual Meeting of Stockholders to be held on May 9, 2012 at 11:00 a.m., local time, at the Courtyard Marriott Hotel located at 8651 Spectrum Center Boulevard, San Diego, California 92123, and any adjournment or postponement thereof. This Proxy Statement was first made available on or about March 30, 2012 to the stockholders. Any proxy given may be revoked at any time prior to the exercise of the powers conferred by it by filing with the Secretary of the Company a written notice signed by the stockholder revoking such proxy or a duly executed proxy bearing a later date. In addition, the powers conferred by such proxy may be suspended if the person executing the proxy is present at the Annual Meeting and elects to vote in person. All shares represented by each properly executed and unrevoked proxy received in time for the Annual Meeting will be voted (unless otherwise indicated thereon) in the manner specified therein at the Annual Meeting and any adjournment or postponement thereof.

The Company’s Annual Report to Stockholders, which includes the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, is available over the Internet or, if requested per the instructions in the Notice, will be mailed to stockholders along with this Proxy Statement. The Annual Report on Form 10-K contains, among other things, financial information regarding the Company and a discussion of business developments during the fiscal year ended December 31, 2011. It is not to be regarded as proxy soliciting material or as a communication by means of which any solicitation of proxies is being made.

VOTING RIGHTS

The close of business on March 16, 2012 (the “Record Date”) has been fixed by the Board as the Record Date for determining stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. As of the Record Date, the Company had outstanding and entitled to vote 28,958,100 shares of common stock. Each holder of record of common stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting.

The holders of record of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business. Under Delaware law, abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Brokers who hold shares in street name for customers have the authority to vote on certain items when they have not received instructions from beneficial owners. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of the New York Stock Exchange (“NYSE”) on which your broker may vote shares held in street name without your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes. Under NYSE rules applicable to our prior annual meetings, the uncontested election of a member of the Board of Directors was considered “discretionary” and brokers were permitted to vote your shares held in street name even in the absence of your instructions. Under recently adopted NYSE rules, any election of a member of the Board of Directors, whether contested or uncontested, is considered “non-discretionary” and therefore brokers are no longer permitted to vote your shares held in street name for the election of directors in the absence of instructions from you.

With regard to the election of directors, the two nominees who receive the greatest number of “FOR” votes will be elected to the Board. Stockholders are not entitled to cumulate votes. Therefore, votes against a candidate, votes withheld and abstentions will have no legal effect in the election of directors. For the approval of the ratification of the appointment of McGladrey and Pullen, LLP as our independent registered public accounting firm for fiscal year 2012, the approval of the compensation of the our named executive officers, and the approval of any other matters properly presented at the Annual Meeting, the matter must be approved by the affirmative

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vote of a majority of the shares of common stock present or represented at the Annual Meeting. However, the vote for the approval of the compensation of our named executive officers is advisory and non-binding in nature and cannot overrule any decisions made by the Board of Directors. Under Delaware law, abstentions are counted as votes cast, and therefore have the same effect as votes against a matter. Broker non-votes, on the other hand, are not considered to be votes cast and have no effect on the outcome of the matter.

All votes will be tabulated by the inspector of elections appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at our 2013 Annual Meeting of Stockholders must be received by us no later than November 30, 2012, which is 120 days prior to the first anniversary of the mailing date of the Proxy Statement, in order to be included in our proxy statement and form of proxy relating to that meeting. If a stockholder fails to give notice by this date, then the persons named as proxies by the Board for the 2013 Annual Meeting may exercise discretionary voting power regarding any such proposal. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in the proxy statement. Under our Bylaws, a stockholder who wishes to make a proposal at the 2013 Annual Meeting without including the proposal in our proxy statement and form of proxy relating to that meeting should submit such proposal to the Company’s Secretary at least 90 days prior to first anniversary of the date of the proxy statement delivered to Stockholders in connection with last year’s annual meeting.

PROPOSAL 1

ELECTION OF DIRECTORS

The Board is divided into three classes, with the terms of office of each class ending in successive years. The term of the directors currently serving in Class I expires on the date of the Annual Meeting. The directors in Class II and Class III will continue in office until their terms expire at the 2013 and 2014 Annual Meeting of Stockholders, respectively. The directors elected in Class I at the Annual Meeting will hold office until the 2015 Annual Meeting of Stockholders or until their successors are duly elected and qualified.

Holders of common stock are entitled to cast one vote for each share held for each of the two nominees for director in Class I. The two nominees receiving the greatest number of “FOR” votes will be elected directors of the Company in Class I. It is intended that the shares represented by the enclosed proxy will be voted, unless otherwise instructed, for the election of the nominees named below. Broker non-votes will have no effect. While the Company has no reason to believe that any of the nominees will be unable to stand for election as a director, it is intended that if such an event should occur, such shares will be voted for such substitute nominee as may be selected by the Board.

No arrangement or understanding exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director. No nominee has any family relationship with any other nominee or with any of the Company’s executive officers or directors.

Set forth below is information with respect to nominees for director and other directors of the Company who will continue in office for terms extending beyond the Annual Meeting, including their recent employment or principal occupation, a summary of their specific experience, qualifications, attributes or skills within the past five years that led to the conclusion that they are qualified to serve as a director, their period of service as a Company director and their age. The nominees for director were nominated by non-management directors of the Company.

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NOMINEES FOR ELECTION AS DIRECTORS

DIRECTORS CONTINUING IN OFFICE UNTIL THE

2013 ANNUAL MEETING OF STOCKHOLDERS

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DIRECTORS CONTINUING IN OFFICE UNTIL THE

2014 ANNUAL MEETING OF STOCKHOLDERS

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Vote Required for Approval and Recommendation of the Board

With regard to the election of directors, the two nominees who receive the greatest number of “FOR” votes will be elected to the Board. Stockholders are not entitled to cumulate votes. Therefore, votes against a candidate, votes withheld and abstentions will have no legal effect in the election of directors.

The Board recommends that stockholders vote FOR ALL of the nominees identified above.

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PROPOSAL 2

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General Information

The Audit Committee of the Board of Directors has appointed McGladrey & Pullen, LLP (“M&P”) as our independent registered public accounting firm (or “independent auditors”) to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2012. The submission of this matter for ratification by stockholders is not legally required; however, the Board of Directors believes that such submission is consistent with best practices in corporate governance and is an opportunity for stockholders to provide direct feedback to the Board of Directors on an important issue of corporate governance. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders. Representatives of M&P are expected to attend the Annual Meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.

Vote Required

Approval of this proposal requires the affirmative vote of a majority of the shares represented at the meeting and entitled to vote.

The Board recommends that stockholders vote FOR the ratification of McGladrey & Pullen, LLP as our independent auditors for the fiscal year ending December 31, 2012.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees for professional services rendered by M&P for 2011 and 2010 (in thousands):

Audit Fees. Audit fees include fees associated with the annual audit of the Company’s consolidated financial statements, reviews of the Company’s interim consolidated financial statements included in its Quarterly Reports on Form 10-Q, review of registration statements filed on Form S-3 and the audit of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

Audit-Related Fees. We did not engage M&P for any audit-related services during the fiscal years ended December 31, 2011 and 2010.

Tax Fees. We did not engage M&P for professional services in connection with tax advice or tax planning during the fiscal years ended December 31, 2011 and 2010.

All Other Fees. We did not engage M&P for any other professional services for the fiscal years ended December 31, 2011 and 2010.

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Audit Committee Pre-approval Policies and Procedures

The Audit Committee pre-approves all audit and permissible non-audit services prior to commencement of services. During fiscal year 2011, all services rendered by M&P were pre-approved by the Audit Committee.

REPORT OF THE AUDIT COMMITTEE (1)

The Audit Committee is composed of three independent directors and operates under a written charter adopted by the Board. The members of the Audit Committee are Messrs. Rossi and Guyett and Ms. Jorden. The Audit Committee recommends to the Board the selection of the Company’s independent auditors.

Management is responsible for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (“PCAOB”) and to issue a report thereon. The Audit Committee monitors and oversees these processes on behalf of the Board.

In this context, the Audit Committee has met and held discussions with management and the independent auditors. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the consolidated financial statements and the effectiveness of internal control over financial reporting with management and the independent auditors. The Audit Committee discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards), as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the PCAOB in Rule 3200T.

The Company’s independent auditors also provided to the Audit Committee the written disclosures and the letters required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence), and the Audit Committee discussed with the independent auditors the firm’s independence from the Company and its management.

Based on the Audit Committee’s discussions with management and the independent auditors as well as the Audit Committee’s review of the representations of management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended that the Board include the audited consolidated financial statements for the year ended December 31, 2011 in the Company’s Annual Report on Form 10-K, filed with the SEC on February 16, 2012.

Submitted by the following members of the Audit Committee:

Robert Guyett (Chairperson)

Mark Rossi

Yon Yoon Jorden

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CORPORATE GOVERNANCE

Board Meetings and Committees

The Board is composed of eight members, six of whom were determined by the Board to be independent within the meaning of the NASDAQ Global Market (“NASDAQ”) listing standards. These independent directors are Messrs. Rossi, Guyett, Lavigne, Goeschel and Howsmon and Ms. Jorden. During the fiscal year ended December 31, 2011, the Board held eight meetings and each Board member attended 75% or more of the aggregate number of the meetings of the Board and of the committees on which they served, held during the period for which they were a director or committee member. The Company also encourages all members of the Board to attend the Company’s Annual Meeting of Stockholders. All but one of the active members of the Board at the time of the Company’s 2011 Annual Meeting of Stockholders were in attendance.

Stockholders may communicate with members of the Company’s Board by mail addressed to the full Board, a specific member of the Board or to a particular committee of the Board at Maxwell Technologies, Inc., c/o Corporate Secretary, 5271 Viewridge Court, Suite 100, San Diego, California 92123.

The Board also has established an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The following table sets forth the members of our board of directors and the committees of which each director is a member.

X = Committee member; * = Chair

Audit Committee

The Audit Committee oversees the Company’s corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. For example, the Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines the engagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new auditors to perform any proposed non-permissible audit services; monitors the rotation of partners of the independent auditors on the Company engagement team as required by law; reviews the financial statements to be included in the Annual Report; and discusses with management and the independent auditors the results of the annual audit and the results of the Company’s quarterly financial statement reviews. The Audit Committee held nine meetings during the fiscal year ended December 31, 2011.

All members of the Company’s Audit Committee are independent (as independence is defined in NASDAQ listing standards). Mr. Guyett and Ms. Jorden have been designated by the Board as the Audit Committee’s financial experts. The Audit Committee has adopted a written Audit Committee Charter available at the Company’s website at investors.maxwell.com.

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Compensation Committee

The Compensation Committee approves the salaries and incentive compensation of employees and the compensation of directors, oversees the administration of the Company’s equity compensation plans and otherwise determines compensation levels and performs such other functions regarding compensation as the Board may delegate. The Compensation Committee held five meetings during the fiscal year ended December 31, 2011. All members of the Company’s Compensation Committee are independent of management (as independence is defined in the NASDAQ listing standards). The Compensation Committee has adopted a written Compensation Committee Charter available at the Company’s website at investors.maxwell.com.

Compensation Committee Interlocks and Insider Participation

None of the Company’s executive officers serves as a member of the board of directors or compensation committee of an entity that has an executive officer serving as a member of the Board or Compensation Committee of Maxwell.

Governance and Nominating Committee

The Governance and Nominating Committee interviews, evaluates, nominates and recommends individuals for membership on the Company’s Board and committees thereof, monitors the function of the Board and its committees regarding overall effectiveness, composition and structure, establishes a process for monitoring compliance with the Company’s Standards of Business Conduct and Ethics and recommends board guidelines and policies for adoption by the Board. Recently, in 2012, the Governance and Nominating Committee was reconstituted from the Governance, Nominating and Strategy Committee, as strategy matters are addressed at the total board level. The Governance and Nominating Committee (then known as the Governance, Nominating and Strategy Committee) held four meetings during the fiscal year ended December 31, 2011.

The members of the Governance and Nominating Committee are independent of management (as independence is defined in the NASDAQ listing standards). The Governance and Nominating Committee has adopted a written Governance and Nominating Committee Charter which is available on the Company’s website at investors.maxwell.com.

When considering a potential candidate for membership on the Company’s Board, the Governance and Nominating Committee considers relevant business and other experience and demonstrated character and judgment as described in the Company’s Board Guidelines, which are posted on the Company’s website at investors.maxwell.com. There are no differences in the manner in which the Governance and Nominating Committee evaluates a candidate that is recommended for nomination for membership on the Company’s Board by a stockholder, as opposed to a candidate that is recommended for nomination for membership by the Governance and Nominating Committee and Board. The Governance and Nominating Committee has not received any recommended nominations from any of the Company’s stockholders in connection with the Annual Meeting.

In addition to the considerations described above, the Governance and Nominating Committee considers the composition of the Board in its evaluation of both candidates for Board membership as well as existing Board members. The Board believes that factors such as background, experience, independence, character, judgment, skills, diversity, age, race, gender and national origin as it relates to each individual Board member as well as the Board as a whole are important considerations in Board composition. The Governance and Nominating Committee believes that, as a group, the nominees above compliment the Board’s composition and bring a diverse range of backgrounds, experiences and perspectives to the Board’s deliberations.

The Governance and Nominating Committee will consider stockholder nominations for directors submitted in accordance with the procedure set forth in Section 3.4 of the Company’s Bylaws, which are posted on the

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Company’s website at investors.maxwell.com. The procedure provides that a timely notice relating to the nomination must be given in writing to the Secretary of the Company prior to the Annual Meeting. To be timely, the notice must be delivered within the time permitted for submission of a stockholder proposal as described under the section “Stockholder Proposals” in this Proxy Statement. Such notice must be accompanied by the nominee’s written consent, contain information relating to the business experience and background of the nominee and include information with respect to the nominating stockholder and persons acting in concert with the nominating stockholder. Since our prior annual meeting, there have been no material changes to the procedures by which stockholders may recommend nominees to the Board.

Standards of Business Conduct and Ethics

The Company’s Standards of Business Conduct and Ethics apply to all of the Company’s employees, officers (including the Company’s chief executive officer, chief financial officer, controller and persons performing similar functions) and directors. The Company’s Standards of Business Conduct and Ethics is posted on the Company’s website at investors.maxwell.com in English, French, German and Chinese and can also be obtained free of charge by sending a request to the Company’s Corporate Secretary at Maxwell Technologies, Inc., 5271 Viewridge Court, Suite 100, San Diego, California 92123. Any changes or waivers of the Standards of Business Conduct and Ethics for the Company’s Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions will be disclosed on the Company’s website.

Board Leadership Structure and Role in Risk Oversight

Our Board separates the positions of Chairperson of the Board and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairperson of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairperson, particularly as the Board’s oversight responsibilities continue to grow. We believe that having separate positions and having an independent outside director serve as Chairperson is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.

The Board is responsible for oversight of the Company’s risk management process. The entire senior management of the Company is responsible for risk assessment activities including, identifying, prioritizing and managing risks as well as reporting and communicating on such risk management activities to the Board of Directors. A Chairperson that is independent of management adds another layer of insight to the risk assessment process by bringing a broad perspective on the Company’s goals and strategic objectives.

As part of its oversight of our Company’s executive compensation programs, the Compensation Committee considers the impact of the programs, and the incentives created by the compensation awards that it administers, on our Company’s risk profile. In addition, the Compensation Committee reviews all of our Company’s compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk assumption, to determine whether they present a significant risk to our Company.

The Compensation Committee has concluded that, for all employees, our Company’s compensation programs do not encourage excessive risk and are not likely to have a material adverse effect on the Company for the following reasons:

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Compensation of Directors

For the fiscal year ended December 31, 2011, non-employee directors of the Company received compensation for services provided as a director in the form of cash and equity compensation. For services in 2011, each board member received an annual cash retainer of $50,000. In addition, the chairperson of the Board and each of the chairpersons of the committees of the Board received additional annual cash compensation as follows: $20,000 to the Chairperson of the Board; $12,000 to each of the chairpersons of the Audit Committee and Compensation Committee; and, $10,000 to the Chairperson of the Governance, Nominating and Strategy Committee. Further, each member of the committees of the Board, who does not also serve as the chairperson of a committee, received the following annual cash compensation: $6,000 to each member of the Audit Committee and the Compensation Committee; and, $5,000 to each member of the Governance and Nominating Committee.

In addition to the cash compensation described above, each Board member receives annual compensation in the form of a restricted stock unit (“RSU”) award. In the first quarter of 2011, each non-employee director received an RSU award under the 2005 Omnibus Equity Incentive Plan covering a number of shares of our common stock determined by dividing $60,000 by the closing price of our common stock on the date of grant, rounded up to the nearest whole share.

In addition to the annual RSU awards described above, directors are eligible to receive additional equity-based awards under our 2005 Omnibus Equity Incentive Plan at the time of their election or appointment, or on a discretionary basis from time to time as determined by the Compensation Committee.

The following table sets forth all of the compensation awarded to, earned by, or paid to each person who served as a director during fiscal year 2011, other than a director who also served as our chief executive officer and did not receive any compensation for services as a director.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock by (i) each person (or group of affiliated persons) known by the Company to beneficially own more than five percent of the outstanding shares of common stock, (ii) each director of the Company, (iii) each of the named executive officers, which includes our current Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Senior Vice President of Sales and Marketing, and (iv) all current directors and named executive officers of the Company as a group. Information for the officers and directors is as of March 16, 2012. The address for each individual is 5271 Viewridge Court, Suite 100, San Diego, California 92123.

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s executive officers and directors and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC, and the National Association of Securities Dealers, Inc. Executive officers, directors and greater than ten percent (10%) stockholders are required by Commission regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of such forms and the written representations of our executive officers, directors and greater than ten percent (10%) stockholders, we have determined that no person was delinquent with respect to reporting obligations as set forth in Section 16(a) of the Exchange Act, except one Form 4 filed late by Mr. Guyett in March 2011.

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PROPOSAL 3

ADVISORY VOTE ON THE COMPENSATION OF NAMED EXECUTIVE OFFICERS

The Board of Directors of the Company is providing our stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers. This advisory stockholders vote, commonly known as a “say-on-pay” vote, provides stockholders with the opportunity to endorse or not endorse the Company’s fiscal 2011 executive compensation programs and policies and the compensation paid to the named executive officers as discussed in the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative disclosure below.

As discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our goal is to maintain compensation programs that will fairly compensate our officers and employees, attract and retain qualified employees who are able to contribute to the long-term success of the Company, incent future performance towards clearly defined corporate goals, and align employees’ long-term interests with those of the Company’s stockholders. We believe our compensation policies and procedures demonstrate a strong link between pay and performance.

Vote Required for Approval and Recommendation of the Board

Because say-on-pay votes are advisory and non-binding, voting results cannot overrule any decisions made by the Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when considering future compensation arrangements for our named executive officers.

The Board recommends that stockholders vote FOR approval of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative disclosure.

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EXECUTIVE COMPENSATION

The executive officers of the Company, their positions with the Company and experience are set forth below.

The officers of the Company hold office at the discretion of the Board. During the fiscal year ended December 31, 2011, the officers of the Company devoted substantially all of their business time to the affairs of the Company for the period in which they were employed, and they intend to do so during the fiscal year ending December 31, 2012.

Background

David J. Schramm

David J. Schramm joined Maxwell as President and CEO, and was appointed a director, in July 2007. Previously, he spent the bulk of his 37-year business career in a series of senior management and engineering positions with General Motors and its primary Tier I parts supplier, Delphi Automotive Systems. Before joining Maxwell, he was president and chief executive officer of EADS North America Defense Test and Services, the U.S. subsidiary of the corporate parent of Airbus, and immediately before that, from 2001 to 2006, he was president and chief executive officer of Arrowhead Products Corp., a leading supplier of specialty systems to the aerospace and automotive industries.

Kevin S. Royal

Kevin S. Royal joined Maxwell as Senior Vice President, Chief Financial Officer, Treasurer and Secretary in April 2009. From May 2005 until he joined Maxwell, he was senior vice president and chief financial officer of Blue Coat Systems, Inc., a previously Nasdaq-listed developer and provider of application delivery network technology. From December 1996 until May 2005, he held a series of senior finance positions, culminating with his appointment as vice president and chief financial officer of Novellus Systems, Inc., an S&P 500 company that manufactures, markets and services semiconductor capital equipment. Before he joined Novellus, he spent 10 years with Ernst & Young LLP, where he became a certified public accountant. He also serves as a director of a private company.

George Kreigler III

George Kreigler III joined Maxwell in April 2006, assuming global responsibility for ultracapacitor operations, including overseeing the Company’s offshore manufacturing activities in China. In August 2009, Mr. Kreigler was promoted to Senior Vice President and Chief Operating Officer. Mr. Kreigler has more than 30 years of high technology operations management experience, including supervision of multiple large-scale offshore manufacturing facilities. Before joining Maxwell, he spent eight years with Quantum Corporation, most recently as corporate senior vice president and general manager of Quantum Storage Systems. Previously, he was vice president, manufacturing systems, for Read-Rite Corporation, and before that spent 12 years in senior operations and engineering positions with disk drive manufacturer Maxtor Corporation.

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Van Andrews

Van Andrews joined Maxwell in February 2010 as Vice President of Sales. In October 2010, Mr. Andrews was promoted to Senior Vice President, Sales and Marketing. He is an experienced technology executive who has worked at several companies with global presences and both direct and indirect distribution channels. Most recently, from 2005 to 2007, he was vice president of North American sales of D-Link Corp, the global leader in networking and data communications solutions headquartered in Asia. Previously, he was president and chief executive officer of U.S. Robotics, a privately held provider of networking products located in Chicago, IL. In addition, he served as general manager of Toshiba America Information Systems’ Computer Systems Division for nearly eight years from 1991 to 1998.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis reviews and discusses our compensation programs and policies for our executive officers who are required to be named in our Summary Compensation Table under the rules of the Securities and Exchange Commission. This Compensation Discussion and Analysis, which should be read together with the compensation tables and related disclosures included below, also contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation decisions and programs.

Compensation Philosophy and Objectives

We recognize that our success depends to a great degree on the integrity, knowledge, imagination, and skill of our employees. Toward this end, we try to design our compensation and benefits programs in order to attract, retain and motivate talented, highly qualified and committed executive officers who will pursue the achievement of our business goals and who embody our corporate values. In doing so, we strive to make use of multiple performance measures designed to keep our executive officers focused on and committed to accomplishing our long-term business objectives, while offering sufficient fixed compensation to remain competitive within our industry and geographic location.

Accordingly, the principal objectives of our executive compensation programs are:

As the Compensation Committee makes its decisions regarding the Company’s executive compensation programs, the Committee reviews individual, departmental and Company performance against individual, departmental and Company goals, and considers such qualitative and subjective factors as determined appropriate, all as discussed in more detail below. The Compensation Committee places primary emphasis upon achievement of critical performance objectives because the Committee recognizes the importance of providing compensation opportunities that effectively reward management for such achievement, and believes that successful execution against goals is the best way to enhance long-term stockholder value. The Compensation Committee believes the Company’s compensation philosophy and programs are designed to foster a performance-oriented culture that aligns employee’s interests with those of our stockholders.

Each year, we provide our stockholders with the opportunity to cast an advisory vote on executive compensation (a “say-on-pay vote”). At the 2011 Annual Meeting, a substantial majority, or 93.7%, of the votes cast on the advisory say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms our stockholders’ support of our approach to executive compensation. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for the named executive officers.

Compensation Consultant

The Compensation Committee engages in a comprehensive review and analysis of our executive compensation programs each year, normally in the first quarter of each calendar year prior to the annual administration of compensation changes, which typically occurs in February. As part of this comprehensive review, the Compensation Committee retains a reputable and independent compensation advisor to advise the Committee in matters regarding the compensation of our executive officers. The Committee engaged

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Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant to assist the Committee in determining executive compensation levels for 2011. Neither the Company nor our Board of Directors had previously worked with Meridian, which was selected in part because of its substantial experience providing independent advice regarding compensation matters to boards of directors of public companies.

The Compensation Committee instructs the compensation consultant to provide relevant market data against which to evaluate our existing compensation arrangements with our executive officers. In consideration of the compensation consultant’s analysis, as well as other factors, the Compensation Committee makes changes to the compensation of our executive officers which become effective in February of the year following the compensation analysis.

2011 Executive Compensation

In the fourth quarter of 2010, the Compensation Committee engaged Meridian as its independent compensation consultant for the first time to help it identify appropriate market segment data against which to compare our executive compensation levels and programs. The compensation consultant helped the Compensation Committee to identify the following companies in the battery, cleantech, technology, and manufacturing industries with similar revenues and/or market capitalizations to form the peer group of public companies against which our executive compensation programs were reviewed, compared, and evaluated:

The compensation consultant compared our 2010 executive officer compensation programs on a percentile basis against data from the peer group. For Mr. Schramm, our Chief Executive Officer, these comparisons generally revealed that his base salary, target annual bonus, and total target cash compensation were each above the 50th percentile of the peer group, and that his target long-term incentive compensation was below the 50th percentile of the peer group, thereby leaving total target compensation slightly below the 50th percentile of the peer group. For Messrs. Royal and Kreigler, these comparisons revealed base salary, target annual bonus, and total target cash compensation to each be at approximately the 50th percentile of the peer group and target long-term incentive compensation significantly below the 50th percentile of the peer group, thereby leaving their total target compensation below the 50th percentile of the peer group. Prior to his promotion to Senior Vice President, Sales and Marketing in October 2010, Mr. Andrews was not considered an executive officer and therefore his compensation was not part of the compensation consultant’s review.

In consideration of the compensation consultant’s analysis, the Compensation Committee made changes to the compensation of our executive officers which became effective in February 2011. Specifically, the Compensation Committee decided to set total target compensation at the 50th percentile of the selected peer group, with narrowly permitted variances, and to increase long-term incentive compensation potential. The executive compensation amounts resulting from these changes are set out below under the heading Components of Compensation.

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In addition, in order to improve the management of stockholder dilution and reduce the consumption of our equity award pool, the Compensation Committee decided to grant restricted stock with service and performance-based vesting conditions, rather than a mix of restricted stock and options, as part of our equity compensation program.

Role of the Compensation Committee and Management in Setting Executive Compensation

As the manager of the executive team, our CEO assesses the contributions of other executives to the Company’s performance and results, and makes a recommendation to the Compensation Committee with respect to any increase in salary, cash bonus and annual equity incentive award for each executive officer other than himself. The Compensation Committee meets with the CEO to evaluate, discuss and modify or approve these recommendations. While the Compensation Committee considers the CEO’s recommendations, it need not adopt these recommendations and may adjust them as it determines appropriate. The Compensation Committee also conducts a similar evaluation of the CEO’s contributions in an executive session when the CEO is not present, and determines any increase in salary, cash bonus and annual equity incentive award for him.

The Company’s management team and human resources group also support the Compensation Committee in fulfilling its responsibilities by gathering information and performing administrative tasks.

Components of Compensation

Compensation paid to the Company’s named executive officers consists of base salary, annual incentive bonuses, equity incentive awards, certain contractual severance and change in control benefits, and certain perquisites.

Base Salary. We provide base salary to our executive officers to compensate them for services rendered on a day-to-day basis during the fiscal year and to provide sufficient fixed cash compensation to allow the officers to focus on their ongoing responsibilities. In determining the base salary of executive officers, the Compensation Committee considers a variety of factors, including recommendations of the CEO (other than with respect to his own salary), the executive’s level of responsibility and individual performance, and the salaries of similar positions in the Company and in comparable companies. Adjustments to base salaries are typically made effective following a review of executive compensation by the Compensation Committee in the first quarter of each year, and reflect the Compensation Committee’s evaluation of each named executive officer’s performance for the prior fiscal year.

In February 2011, the Compensation Committee approved compensation changes that resulted in base salaries for our executive officers as follows:

These changes resulted in the base salary for each of our named executive officers being at or slightly above the 50th percentile of the peer group. Mr. Schramm’s base salary was only increased modestly because the compensation constultant’s study showed that his base salary was already slightly above the targeted 50th percentile of the peer group data. As previously indicated, Mr. Andrews’ compensation was not included in the compensation constultant’s study because he was not considered an executive officer prior to his promotion to Senior Vice President, Sales and Marketing in October 2010. Therefore, Mr. Andrews received a 5% increase in base salary to provide merit and cost of living adjustments.

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Annual Performance-based Cash Bonuses. Annual cash bonuses are used to reward our executive officers for the achievement of Company performance goals. The program is based on achievement of annual performance targets that are established each year, and are subject to adjustment as the Compensation Committee deems appropriate. The Company’s targets and objectives consist of short-term operating, strategic and financial goals that, in turn, further our long-term business objectives and build stockholder value. Final calculation of the Company’s performance and determination and payment of the awards is made as soon as is practicable after completion of the Company’s fiscal year.

The 2011 incentive bonus program for our named executive officers consisted of three components related to the achievement of certain operating metrics set forth in the Company’s 2011 operating plan as follows: 50% of the target bonus amount related to the achievement of revenue of $157.6 million, 25% related to the achievement of non-GAAP (explained below) gross profit of $64.9 million, and 25% related to the achievement of non-GAAP operating income of $12.1 million. Non-GAAP gross profit and operating income are determined by excluding certain non-recurring and non-cash items from actual financial results prepared under U.S. Generally Accepted Accounting Principles (“GAAP”). Specifically, these non-GAAP measures exclude stock-based compensation expense, the impact of significant legal settlements and the impact of significant legal expenses related to legal matters that were not present or known when the targets were set. For 2011, annual cash bonuses were to be paid at 100% of target if operating metrics were achieved, and would be paid on a sliding scale from zero to 150% of target if the actual results achieved were higher or lower than the target.

Per the terms of their employment agreements, Mr. Schramm was eligible to earn a target bonus of 100% of his base salary, and Messrs. Royal and Kreigler were each eligible to earn a target bonus of 50% of their respective base salaries. Although Mr. Andrews does not have an employment agreement with the Company, the Compensation Committee determined his 2011 target bonus eligibility to be 50% of his base salary.

For 2011, the Company achieved revenues of $157.3 million, and after applying adjustments to arrive at the non-GAAP financial measures described above, the Compensation Committee determined 2011 non-GAAP gross profit of $62.0 million and 2011 non-GAAP operating income of $9.7 million. Based on the application of the sliding scale described above, the target bonus amount related to the revenue metric was paid at 100%, the target bonus amount related to non-GAAP gross profit was paid at 70% and no amount was paid related to the non-GAAP operating income target. In addition to the bonus amounts paid in connection with our 2011 revenue, non-GAAP gross profit and non-GAAP operating income achievements, the Committee also approved payment of a discretionary bonus amount to each of our named executive officers in order to recognize their outstanding individual contributions to the Company’s 2011 operational and strategic progress. These discretionary bonus amounts were paid as follows: $63,400 to Mr. Schramm; $30,000 to Mr. Royal; $27,000 to Mr. Kreigler; and $30,000 to Mr. Andrews.

Equity Incentive Awards. Stock-based awards are intended to create an opportunity for employees of the Company to acquire an equity ownership interest in the Company. An effective equity component within total compensation maintains an alignment between the interests of executive officers and stockholders by allowing executives to participate in the long-term appreciation of our stockholder value, while reducing the economic benefit of such awards in the event that we do not perform well. Additionally, our equity incentive awards provide an important retention tool, as they are generally subject to multi-year vesting conditions.

Beginning in 2011, in order to improve the management of stockholder dilution and reduce the consumption of our equity award pool, the Compensation Committee decided to grant restricted stock, rather than a mix of restricted stock and options, as part of our equity compensation program. For executive officers, the vesting of restricted stock awards is tied partially to continuous service and partially to performance-based vesting criteria conditioned on achievement of specific Company performance milestones. In February 2011, the Company granted restricted share awards to our named executive officers, with 50% of the share award’s vesting over a period of four years of continuous service, and 50% contingent upon the Company achieving certain financial targets within the next three fiscal years. These financial targets relate to the achievement of a specified annual

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revenue target, on which vesting of 25% of the share awards is contingent, and the achievement of a specified annual net profit after tax target, calculated on a non-GAAP basis, on which vesting of the remaining 25% of the share awards is contingent. The financial targets to which vesting of these restricted awards is tied are based on our 2013 financial projections and business plan. We consider our 2013 annual revenue and net profit after tax targets to be confidential. Revealing specific objectives at this time would provide competitors and other third parties with insights into the Company’s confidential business plans and longer-term strategies, thereby causing competitive harm. The Compensation Committee believes these financial targets are attainable by the end of the three-year performance period based on the expected growth trajectory of the Company, along with focused efforts by our executive officers, and in the absence of significant changes in economic conditions. Non-GAAP net profit after tax excludes certain non-cash and non-recurring items, including stock-based compensation expense, the impact of legal settlements and the impact of expenses related to certain legal and other matters that were not present or known when the targets were set. These milestones must be achieved by December 31, 2013, or the awards will be cancelled. Pursuant to these awards, Mr. Schramm was granted 34,265 restricted shares; Mr. Royal was granted 14,233 restricted shares; Mr. Kreigler was granted 14,660 restricted shares; and Mr. Andrews was granted 10,121 restricted shares.

Severance, Change in Control and Other Post-Employment Programs. With respect to stock options and restricted stock awards, the Company has provided for the acceleration of vesting for certain executive officers upon the occurrence of certain events, including termination of employment due to death or disability, termination without cause or resignation following certain triggering events after a change in control of the Company. The Company further provides for acceleration of vesting of restricted stock awards upon a change in control, including for awards subject to performance milestones. The Compensation Committee believes that the aforementioned accelerated vesting provisions are necessary to provide a competitive compensation package, and to keep executives focused on their responsibilities during uncertain times caused by a change in control. The agreements between the Company and its named executive officers are described more fully in the sections entitled “Employment Agreements” and “Potential Payments Upon Termination or Change in Control” below.

In 2011, the Compensation Committee did not make any changes to the executive officers’ severance or change in control-related compensation.

Perquisites. The Company generally does not provide its executives with perquisites that are not available to all Company employees, other than car allowances. In 2011, the Company provided a car allowance to Messrs. Schramm, Royal, Kreigler, and Andrews. In addition, the Company provided Messrs. Schramm and Andrews with a cash reimbursement in lieu of their participation in the Company’s regular health care plans. The amounts of these benefits are detailed in the Summary Compensation Table below.

Certain Corporate Governance Considerations

We currently do not require our executive officers to own a particular number of shares of our common stock. The Compensation Committee is satisfied that stock and option holdings among our executive officers are sufficient at this time to provide motivation and to align their interests with those of our stockholders.

The Compensation Committee has not adopted a policy that goes beyond existing statutory requirements with respect to whether we will make retroactive adjustments to any cash- or equity-based incentive compensation paid to executive officers (or others) where the payment was predicated upon the achievement of financial results that were subsequently the subject of a financial restatement. We will comply with applicable laws and regulations requiring any such adjustments to, or recovery of, incentive compensation in connection with a financial restatement and the Compensation Committee intends to adopt a policy in this regard once SEC rules on this topic are issued, which is expected to occur later this year.

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Tax Considerations

Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that we may deduct in any one year with respect to our Chief Executive Officer and each of our three most highly paid executive officers (excluding under current rules our Chief Financial Officer). There is an exception to the $1 million limitation for performance-based compensation meeting certain requirements. To qualify for the exemption, at the 2010 Annual Meeting, the stockholders approved a limit under our 2005 Omnibus Equity Incentive Plan on the maximum number of shares for which a participant may be granted stock options in any calendar year. We anticipate that any compensation deemed paid to an executive officer in connection with the exercise of options will qualify as performance-based compensation, and should not be subject to the $1 million deduction limitation. Accordingly, all compensation deemed paid with respect to such options should remain deductible by the Company without limitation under Section 162(m). Restricted stock awards that vest solely on length-of-service conditions are not considered performance-based under Section 162(m) and, therefore, are subject to the $1 million deduction limitation. However, such restricted stock awards may qualify for the exemption if vesting is based on stockholder-approved performance metrics and the awards are otherwise administered in accordance with the Section 162(m) requirements. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all compensation to be deductible and retains discretion to award compensation that exceeds the $1 million deduction limitation. Compensation paid to all executive officers covered by the Section 162(m) deduction rule exceeded the $1 million deduction limitation by $302,000 in 2011. However, due to our significant net operating loss carry-forward, exceeding the limit has not resulted in the incurrence of federal income taxes.

COMPENSATION COMMITTEE REPORT (1)

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by the following members of the Compensation Committee:

Mark Rossi (Chairperson)

Robert Guyett

Roger Howsmon

Jean Lavigne

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2011 SUMMARY COMPENSATION TABLE

The following table sets forth all of the compensation awarded to, earned by, or paid to the Company’s named executive officers, which includes our current chief executive officer, chief financial officer, chief operating officer and senior vice president of sales and marketing, in 2011, 2010 and 2009.

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2011 GRANTS OF PLAN-BASED AWARDS

The following table sets forth each non-equity incentive plan award and each equity award granted to the Company’s named executive officers during fiscal year 2011.

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OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END

The following table sets forth information regarding each unexercised option and all unvested restricted stock held by each of our named executive officers as of December 31, 2011.

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2011 OPTION EXERCISES AND STOCK VESTED

With respect to our named executive officers, the following table shows the stock options exercised and the number of shares of restricted stock that vested during fiscal year 2011.

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EMPLOYMENT AGREEMENTS

In July 2007, the Company entered into an employment agreement with Mr. Schramm. The agreement provides for a base salary and an incentive bonus with a target amount of 100% of his base salary. The actual amount of the bonus will be determined by our Board or our Compensation Committee. The agreement provides that if Mr. Schramm’s service is terminated without cause, he will continue to receive his base salary for a period of twelve months, at the rate in effect at the time of termination, and up to twelve months of health benefits. Pursuant to the agreement, Mr. Schramm was granted an option to purchase 150,000 shares of the Company’s common stock and 100,000 restricted shares of the Company’s common stock. The options vest over four years, so long as Mr. Schramm is continuously employed. On the first anniversary date of Mr. Schramm’s employment date, 25% of the options vested, with the remainder vesting in equal monthly installments over the following three years. Also, on the first anniversary date of Mr. Schramm’s employment date, 25% of the restricted shares vested, with the remainder vesting in equal quarterly installments over the next three years. If the Company is subject to a change in control, all restricted shares will vest in full and if Mr. Schramm is subject to an involuntary termination within twelve months of the change in control, all options will vest in full.

In March 2009, the Company entered into an employment agreement with Mr. Royal. The agreement provides for a base salary and an incentive bonus with a target amount of 50% of his base salary. The actual amount of the bonus will be determined by our Board or our Compensation Committee. The agreement provides that if Mr. Royal’s service is terminated without cause, he will receive his monthly base salary for six months, at the rate in effect at the time of termination, and up to six months of health benefits. Pursuant to the agreement, Mr. Royal was granted an option to purchase 100,000 shares of the Company’s common stock and 40,000 restricted shares of the Company’s common stock. The options and half of the restricted shares vest over four years, so long as Mr. Royal is continuously employed by us; the balance of the restricted shares are subject to vesting based upon meeting various departmental or Company performance objectives and completion of one year of service. If the Company is subject to a change in control, all restricted shares will vest in full and if Mr. Royal is subject to an involuntary termination within six months of the change in control, all options will vest in full.

In August 2009, the Company entered into an amended employment agreement with Mr. Kreigler, appointing him as the Chief Operating Officer of the Company. The agreement provides for a base salary and an incentive bonus with a target amount of 50% of his base salary. The actual amount of the bonus will be approved by our Board or our Compensation Committee. Mr. Kreigler was paid a one-time retention bonus equal to $264,000, which was contingent upon his continued employment with the Company through March 1, 2010. The agreement provides that if Mr. Kreigler’s service is terminated without cause, he will receive an amount equal to one-half of his annual base salary in effect at the date of termination. Pursuant to the agreement, Mr. Kreigler was granted an option to purchase 100,000 shares of the Company’s common stock, vesting 25% on each anniversary of the grant date over the following four years, so long as Mr. Kreigler is continuously employed by the Company. If the Company is subject to a change in control, all restricted shares will vest in full and if Mr. Kreigler is subject to an involuntary termination within six months of the change in control, all options will vest in full. Mr. Kreigler’s employment agreement was amended in December 2010 to comply with certain technical requirements imposed by Section 409A of the Internal Revenue Code.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

David J. Schramm

Pursuant to his employment agreement, as amended, if Mr. Schramm’s employment is terminated without cause, either before or after a change in control, he will continue to receive his base salary for a period of twelve months and the Company will pay the equivalent of the employer’s contribution for health benefits for up to twelve months. If Mr. Schramm’s employment terminates due to death or disability, all options and restricted shares granted to Mr. Schramm will become fully vested. If the Company is subject to a change in control, all restricted shares will vest in full and if Mr. Schramm is subject to an involuntary termination within twelve months of the change in control, all options will vest in full.

Kevin S. Royal

Pursuant to his employment agreement, if Mr. Royal’s employment is terminated without cause, either before or after a change in control, he will continue to receive his base salary for a period of six months and the Company will pay the equivalent of the employer’s contribution for health benefits for up to six months. If Mr. Royal’s employment terminates due to death or disability, all stock options and restricted shares granted to Mr. Royal will become fully vested. If the Company is subject to a change in control, all restricted shares will vest in full and if Mr. Royal is subject to an involuntary termination within six months of the change in control, all options will vest in full.

George Kreigler III

Pursuant to his employment agreement, as amended, if Mr. Kreigler’s employment is terminated by the Company without cause, (a) he will be entitled to receive all accrued salary and bonus through the date of termination, plus an amount equal to one-half his annual base salary in effect on the date of termination, and (b) all options then held by Mr. Kreigler will continue to vest according to their terms until the six-month anniversary of the termination date, and shall be exercisable to the extent so vested until the 60^th day following the first anniversary of the date of termination.

If Mr. Kreigler’s employment terminates due to death or disability, he will be entitled to receive all accrued salary and bonus through the date of termination plus an amount equal to six months of his annual base salary in effect on the date of termination; and all options and restricted shares will vest in full.

Upon a change in control, all restricted shares granted to Mr. Kreigler will vest in full. If, following a change in control, Mr. Kreigler’s employment is terminated by the Company without cause or he resigns following the occurrence of certain triggering events, in either case within three years after a change in control of the Company, he will be entitled to receive all accrued salary and bonuses through the date of termination, plus two cash payments, each equal to 50% of his annual base salary (the first such payment to be paid within 30 days and the second such payment to be paid within one year), plus a continuation of all benefit coverage for six months. In addition, all options will vest in full. If payment of any of the benefits described above results in excise tax being imposed under Section 4999 of the Internal Revenue Code, then the Company will pay Mr. Kreigler an additional amount (the “gross up payment”) equal to (a) the amount of such excise tax and (b) the amount necessary to pay federal and California income tax arising from the payment described in clause (a). However, for any future change in control agreements we may enter into or materially amend, we do not intend to provide for an excise tax gross-up payment.

Van Andrews

The Company has not entered into an employment agreement with Mr. Andrews. However, pursuant to the terms of his equity award agreements, if Mr. Andrews’s employment terminates due to death or disability, all

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options and restricted shares will vest in full. In addition, upon a change in control, all restricted shares granted to Mr. Andrews will vest in full, regardless of whether Mr. Andrews terminates or resigns following a triggering event.

Estimated Payments and Benefits

The following table describes the potential payments and benefits upon termination of each of our named executive officer’s employment before or after a change in control of the Company described above, as if each officer’s employment terminated as of December 31, 2011, the last business day of the 2011 fiscal year.