TRANSITION AGREEMENT

Exhibit 10.1

MAXWELL TECHNOLOGIES, INC.

TRANSITION AGREEMENT

This Transition Agreement (the “Agreement”) is made as of this 23 day of July, 2007, by and between MAXWELL TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and RICHARD BALANSON (“Executive”). The parties agree with each other as follows:

1. Transition . Executive’s full-time employment shall terminate as of the close of business on July 23, 2007 (the “Transition Date”). Executive further agrees to resign from the Board of Directors of the Company (the “Board”), effective as of the Transition Date.

2. Future Position .

(i) Transition Period . Executive shall be employed by the Company on a part-time basis for the period commencing on the Transition Date and ending on December 31, 2011 (the “Transition Period”). Subject to Section 5, the Company shall pay Executive a salary during the Transition Period. Such salary shall be paid in accordance with the Company’s standard payroll procedures, and the amount of such salary shall be as set forth in the table below (subject to applicable withholding taxes). During the Transition Period, Executive shall not be entitled to participate in the Company’s employee benefit plans, except as provided in Paragraph (ii) below. During the Transition Period, Executive shall have the title of Senior Technical Adviser and shall provide such services to the Company as the Board or the Company’s Chief Executive Officer may reasonably request. Executive may be required to commit to such services up to the number of hours per week set forth in the table below. In the event of Executive’s death prior to the completion of the Transition Period, the remaining payments that would otherwise have been made to Executive under this Paragraph (i) shall instead be paid on the same schedule to Executive’s designated beneficiary or beneficiaries or, if none, to his estate.

(ii) Payments in Lieu of Benefits . In lieu of all group insurance coverage and participation in other employee benefit plans, the Company shall pay Executive $15,300 per year in accordance with the Company’s standard payroll procedures (subject to applicable withholding taxes).

(iii) Options . The Transition Period shall be treated as employment with the Company for purposes of determining the expiration date of all options to purchase shares of the Company’s Common Stock held by Executive, as provided in the Stock Option Agreements evidencing such options.

(iv) Restricted Shares . The Transition Period shall be treated as employment with the Company for purposes of determining the vested portion of all awards of restricted shares of the Company’s Common Stock held by Executive, as provided in the Restricted Stock Agreements applicable to such shares.

(v) Savings Clause . Payments under this Section 2 shall in no event commence prior to the earliest date permitted by Section 409A(a)(2) of the Code. If the commencement of such payments must be delayed, as determined by the Company, then the deferred installments shall be paid in a lump sum on the earliest practicable date permitted by Section 409A(a)(2) of the Code.

(vi) Exclusive Rights . After the Transition Date, 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 this Transition Agreement.

(vii) Cooperation . 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.

3. 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 3 shall be construed as precluding either party from bringing an action for injunctive relief or other equitable relief. The parties shall keep confidential from third parties (other than the arbitrator) the existence of each such claim, controversy or dispute and the determination thereof, unless otherwise required by law. Except as provided in the following two sentences, each decision rendered by the arbitrator shall be final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. In rendering his or her decision, the arbitrator shall be bound to follow California or Federal law, as applicable, in the same manner as would a court of law. Any claim that the arbitrator made a mistake or error in determining or applying the appropriate law shall be subject to judicial review.

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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.

4. No Solicitation . Executive agrees that after the Transition Date, he shall not hire, solicit or otherwise cause to be solicited for employment elsewhere, either directly or indirectly, 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. This Section 4 shall apply until the close of the Transition Period.

5. Noncompetition . Executive agrees that the Company may immediately discontinue all payments under Section 2 if he (a) directly or indirectly owns, manages, operates or controls, or participates in the ownership, management, operation or control of, or is connected with or has 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, (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 or (iii) any other country in which the Company engages in or has engaged in business during the past five years or (b) permits any entity or other person under his control to engage in any activity prohibited under clause (a). This Section 5 shall apply until the close of the Transition Period.

6. 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 the 2005 Omnibus Equity Incentive Plan (and the Stock Option and Restricted Stock Agreements issued to Executive thereunder), the other employee benefit and welfare programs maintained by the Company, and the Invention and Secrecy Agreement dated August 1, 2003, and signed by Executive, which are supplementary to this Agreement and are each deemed to be incorporated herein by reference. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied in this Agreement, and that no agreement, statement or promise not contained in this Agreement shall be valid or binding. Except for the other agreements, plans and programs referred to in this Section 6, this Agreement also supersedes any and all other agreements and contracts, whether verbal or in writing, relating to the subject matter hereof, including (without limitation) the Employment Agreement dated August 1, 2003.

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

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8. 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.

9. 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 be binding upon and shall inure to the benefit of any successor of the Company and Executive, and any such successor shall be deemed substituted for the Company or Executive under the terms of this Agreement. The term “successor” as used in this Section 9 shall include any person, firm, corporation or other business entity that at any time, by merger, purchase or otherwise, acquires or gains control over all or substantially all of the assets or business of the Company.

10. 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