CYGNUS, INC.

Charter for the
Compensation Committee
of the Board of Directors

(As Adopted by the Board of Directors on February 9, 2004)

Purpose

The primary purpose of the Compensation Committee established pursuant to this charter will be to attract and retain individuals of high caliber to serve as executive officers of the Company, to motivate their performance in the achievement of the Company’s strategic objectives and to align the interests of executive officers with the long-term interest of stockholders by optimizing stockholder value in a rapidly changing health care market environment. The Compensation Committee has primary responsibility for ensuring that compensation and benefits policies and programs for senior management and the Board comply with applicable law and stock listing requirements, and are devised and maintained to provide and retain for the Company a high level of corporate governance competence. This Charter is designed to achieve these objectives.

Membership and Power to Act

The Compensation Committee will be comprised of at least two members of the Board of Directors. Such members will be elected by and serve at the pleasure of the Board. As long as the Company is a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no member of the Committee will be an employee (including a current officer) or a former officer of the Company, and each member shall qualify as (i) a “Non-Employee Director” under Rule 16b-3(b)(3)(i) promulgated under the Exchange Act, (ii) as an “outside director” under the rules promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and, if applicable, (iii) as an independent director as defined in Nasdaq Rule 4200(a)(15).

The Committee shall exercise its powers in accordance with the Company’s bylaws and applicable law, provided that no action of the Committee shall be valid unless taken pursuant to a resolution adopted and approved by at least two members of the Committee.

Meetings

The Compensation Committee will meet from time to time to perform its duties hereunder.

Authority and Responsibilities

1.       To establish and review at least annually the Company’s general compensation policies applicable to the Company’s Chief Executive Officer and other executive officers, including the relationship of the Company’s and the executive officers’ performance to executive compensation generally, and the Chief Executive Officer’s compensation in particular, and the bases for the Chief Executive Officer’s compensation;

  1. To determine at least annually the appropriate elements and levels of total compensation (including, without limitation, salaries, fees, benefits, executive incentive plans and perquisites) for the Chief Executive Officer, the other executive officers of the Company and any other officer subject to Section 162(m) of the Code or Rule 16b-3 under the Exchange Act. The Company’s Chief Executive Officer shall not be present during any Committee voting with respect to, or Committee deliberations concerning, his or her compensation;
  2. To review and, to the extent appropriate, approve for senior management and any prospective candidates for senior management positions any employment, severance, change in control or similar agreement or arrangement proposed to be provided to such persons;
  3. Annually review director compensation and recommend to the full Board for approval the form and amount of director compensation;
  4. Periodically review the Company’s compensation arrangements and equity-based and incentive bonus plans and recommend to the Board for approval material changes thereto or adoption of other material employee benefit, bonus, severance and other compensation plans (unless the Board has delegated such authority to the Committee).
  5. To administer the incentive bonus plans in which the executive officers participate and equity-based compensation plans that may be adopted by the Company from time to time, including, without limitation, the determination of the persons who are to receive awards and the terms of such awards;
  6. To perform such other functions and have such other powers as may be necessary or convenient to the efficient discharge of the foregoing or as may be assigned by the Board from time to time;
  7. To retain advisors (e.g., compensation consultants, attorneys, accountants, etc.) to be used to assist the Committee in its duties hereunder, if applicable; and
  8. To report to the Board of Directors regarding the foregoing from time to time, or whenever it shall be called upon to do so.

Reports

The Compensation Committee will record its minutes, resolutions and recommendations to the Board in written form which will be incorporated as a part of the minutes of the Board of Directors. The Compensation Committee will produce and provide to the Board an annual report of the compensation committee on executive compensation for inclusion in the Company’s annual proxy statement in accordance with applicable SEC rules and regulations.