Exhibit
10.3


 


AEROVATE THERAPEUTICS, INC.


 


2021 EMPLOYEE STOCK PURCHASE PLAN


 


The purpose of the Aerovate Therapeutics, Inc.
2021 Employee Stock Purchase Plan (the “Plan”) is to provide eligible employees of Aerovate Therapeutics, Inc. (the “Company”)
and each Designated Subsidiary (as defined in Section 11) with opportunities to purchase shares of the Company’s common stock, par
value $0.0001 per share (the “Common Stock”). An aggregate of 230,000 shares of Common Stock have been approved and reserved
for this purpose, plus on January 1, 2022, and each January 1 thereafter through January 1, 2031, the number of shares of Common Stock
reserved and available for issuance under the Plan shall be cumulatively increased by the least of (i) 460,000 shares of Common Stock,
(ii) one percent (1%) of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31st, or (iii)
such number of shares of Common Stock as determined by the Board of Directors (the “Board”).


 


The Plan includes two components: a Code Section
423 Component (the “423 Component”) and a non-Code Section 423 Component (the “Non-423 Component”). It is intended
for the 423 Component to constitute an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal
Revenue Code of 1986, as amended (the “Code”), and the 423 Component shall be interpreted in accordance with that intent.
Under the Non-423 Component, which does not qualify as an “employee stock purchase plan” within the meaning of Section 423(b)
of the Code, options will be granted pursuant to rules, procedures or sub-plans adopted by the Administrator designed to achieve tax,
securities laws or other objectives for eligible employees. Except as otherwise provided herein, the Non-423 Component will operate and
be administered in the same manner as the 423 Component.


 






     


     


    

 


1.                 
 Administration. The Plan will be administered by the person or persons (the “Administrator”) appointed by the
Company’s Board for such purpose. The Administrator has authority at any time to: (i) adopt, alter and repeal such rules, guidelines
and practices for the administration of the Plan and for its own acts and proceedings as it shall deem advisable; (ii) interpret the terms
and provisions of the Plan; (iii) make all determinations it deems advisable for the administration of the Plan; (iv) decide all disputes
arising in connection with the Plan; and (v) otherwise supervise the administration of the Plan. All interpretations and decisions of
the Administrator shall be binding on all persons, including the Company and the Participants. No member of the Board or individual exercising
administrative authority with respect to the Plan shall be liable for any action or determination made in good faith with respect to the
Plan or any option granted hereunder.


 


2.                 
Offerings. The Company may make one or more offerings to eligible employees to purchase Common Stock under the Plan (“Offerings”).
Unless otherwise determined by the Administrator, the initial Offering will begin and end on dates to be determined by the Administrator.
Thereafter, unless otherwise determined by the Administrator, an Offering will begin on the first business day occurring on or after each
May 1 and November 1 and will end on the last business day occurring on or before the following October 31 and April 30, respectively.
The Administrator may, in its discretion, designate a different period for any Offering, provided that no Offering shall exceed 27 months
in duration or overlap any other Offering.


 






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3.                  Eligibility.
All individuals classified as employees on the payroll records of the Company and each Designated Subsidiary are eligible to
participate in any one or more of the Offerings under the Plan, provided that as of the first day of the applicable Offering (the
 “Offering Date”) they are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week.
Notwithstanding any other provision herein, individuals who are not contemporaneously classified as employees of the Company or a
Designated Subsidiary for purposes of the Company’s or applicable Designated Subsidiary’s payroll system are not
considered to be eligible employees of the Company or any Designated Subsidiary and shall not be eligible to participate in the
Plan. In the event any such individuals are reclassified as employees of the Company or a Designated Subsidiary for any purpose,
including, without limitation, common law or statutory employees, by any action of any third party, including, without limitation,
any government agency, or as a result of any private lawsuit, action or administrative proceeding, such individuals shall,
notwithstanding such reclassification, remain ineligible for participation. Notwithstanding the foregoing, the exclusive means for
individuals who are not contemporaneously classified as employees of the Company or a Designated Subsidiary on the Company’s
or Designated Subsidiary’s payroll system to become eligible to participate in this Plan is through an amendment to this Plan,
duly executed by the Company, which specifically renders such individuals eligible to participate herein.


 


4.                 
Participation.


 


(a)              
Participants. An eligible employee who is not a Participant in any prior Offering may participate in a subsequent Offering
by submitting an enrollment form to his or her appropriate payroll location at least 15 business days before the Offering Date (or by
such other deadline as shall be established by the Administrator for the Offering). A Participant in a current Offering who wishes to
participate in the next Offering need not take any action to be a Participant in the next Offering.


 


(b)               Enrollment.
The enrollment form will (a) state a whole percentage or amount to be deducted from an eligible employee’s Compensation
(as defined in Section 11) per pay period, (b) authorize the purchase of Common Stock in each Offering in accordance with
the terms of the Plan and (c) specify the exact name or names in which shares of Common Stock purchased for such individual are
to be issued pursuant to Section 10. An employee who does not enroll in accordance with these procedures will be deemed to have
waived the right to participate. Unless a Participant files a new enrollment form or withdraws from the Plan, such
Participant’s deductions and purchases will continue at the same percentage or amount of Compensation for future Offerings,
provided he or she remains eligible.


 


(c)              
Notwithstanding the foregoing, participation in the Plan will neither be permitted nor be denied contrary to the requirements of
the Code.


 






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5.                 
Employee Contributions. Each eligible employee may authorize payroll deductions at a minimum of one percent (1%) up to a
maximum of fifteen percent (15%) of such employee’s Compensation for each pay period. The Company will maintain book accounts showing
the amount of payroll deductions made by each Participant for each Offering. No interest will accrue or be paid on payroll deductions.


 


6.                 
Deduction Changes. Except as may be determined by the Administrator in advance of an Offering, a Participant may not increase
or decrease his or her payroll deduction during any Offering, but may increase or decrease his or her payroll deduction with respect to
the next Offering (subject to the limitations of Section 5) by filing a new enrollment form at least fifteen (15) business days before
the next Offering Date (or by such other deadline as shall be established by the Administrator for the Offering). The Administrator may,
in advance of any Offering, establish rules permitting a Participant to increase, decrease or terminate his or her payroll deduction during
an Offering.


 






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7.                 
 Withdrawal. A Participant may withdraw from participation in the Plan by delivering a written notice of withdrawal to his
or her appropriate payroll location at least 14 calendar days prior to the Exercise Date (as defined below) (or such other deadline established
by the Administrator). The Participant’s withdrawal will be effective as of the next business day. Following a Participant’s
withdrawal, the Company will promptly refund such individual’s entire account balance under the Plan to him or her (after payment
for any Common Stock purchased before the effective date of withdrawal). Partial withdrawals are not permitted. Such an employee may not
begin participation again during the remainder of the Offering, but may enroll in a subsequent Offering in accordance with Section 4.


 


8.                 
Grant of Options. On each Offering Date, the Company will grant to each eligible employee who is then a Participant in the
Plan an option (“Option”) to purchase on the last day of such Offering (the “Exercise Date”), at the Option Price
hereinafter provided for, the lowest of (a) a number of shares of Common Stock determined by dividing such Participant’s accumulated
payroll deductions on such Exercise Date by the Option Price (as defined herein), (b) the number of shares determined by dividing
$25,000 by the Fair Market Value of the Common Stock on the Offering Date for such Offering; or (c) such other lesser maximum number of
shares as shall have been established by the Administrator in advance of the Offering; provided, however, that such Option shall be subject
to the limitations set forth below. Each Participant’s Option shall be exercisable only to the extent of such Participant’s
accumulated payroll deductions on the Exercise Date. The purchase price for each share purchased under each Option (the “Option
Price”) will be eighty-five percent (85%) of the Fair Market Value of the Common Stock on the Offering Date or the Exercise Date,
whichever is less.


 






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Notwithstanding the foregoing, no Participant may
be granted an option hereunder if such Participant, immediately after the option was granted, would be treated as owning stock possessing
five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary
(as defined in Section 11). For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of a Participant, and all stock which the Participant has a contractual right to purchase shall
be treated as stock owned by the Participant. In addition, no Participant may be granted an Option which permits such Participant rights
to purchase stock under the Plan, and any other employee stock purchase plan of the Company and its Parents and Subsidiaries, to accrue
at a rate which exceeds $25,000 of the fair market value of such stock (determined on the option grant date or dates) for each calendar
year in which the Option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code and shall be applied taking Options into account in the order in which they were granted.


 


9.                 
Exercise of Option and Purchase of Shares. Each employee who continues to be a Participant in the Plan on the Exercise Date
shall be deemed to have exercised his or her Option on such date and shall acquire from the Company such number of whole shares of Common
Stock reserved for the purpose of the Plan as his or her accumulated payroll deductions on such date will purchase at the Option Price,
subject to any other limitations contained in the Plan. Any amount remaining in a Participant’s account at the end of an Offering
solely by reason of the inability to purchase a fractional share will be carried forward to the next Offering; any other balance remaining
in a Participant’s account at the end of an Offering will be refunded to the Participant promptly.


 






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10.             
 Issuance of Certificates. Certificates or book-entries at the Company’s transfer agent representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal
age as joint tenants with rights of survivorship, or in the name of a broker authorized by the employee to be his, her or their nominee
for such purpose.


 


11.             
Definitions.


 


The term “Compensation” means the regular
or basic rate of compensation.


 


The term “Designated Subsidiary” means
any present or future Subsidiary (as defined below) that has been designated by the Board to participate in the Plan. The Board may so
designate any Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is approved
by the stockholders. The current list of Designated Subsidiaries is attached hereto as Appendix A.


 


The term “Fair Market Value of the Common
Stock” on any given date means the fair market value of the Common Stock determined in good faith by the Administrator; provided,
however, that if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System
(“NASDAQ”), the NASDAQ Global Market, The New York Stock Exchange or another national securities exchange, the determination
shall be made by reference to the closing price on such date. If there is no closing price for such date, the determination shall be made
by reference to the last date preceding such date for which there is a closing price.


 


The term “Parent” means a “parent
corporation” with respect to the Company, as defined in Section 424(e) of the Code.


 






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The term “Participant” means an individual
who is eligible as determined in Section 3 and who has complied with the provisions of Section 4.


 


The term “Subsidiary” means a “subsidiary
corporation” with respect to the Company, as defined in Section 424(f) of the Code.


 


12.             
Rights on Termination of Employment. If a Participant’s employment terminates for any reason before the Exercise Date
for any Offering, no payroll deduction will be taken from any pay due and owing to the Participant and the balance in the Participant’s
account will be paid to such Participant or, in the case of such Participant’s death, to his or her designated beneficiary as if
such Participant had withdrawn from the Plan under Section 7. An employee will be deemed to have terminated employment, for this
purpose, if the corporation that employs him or her, having been a Designated Subsidiary, ceases to be a Subsidiary, or if the employee
is transferred to any corporation other than the Company or a Designated Subsidiary; provided, however, that if a Participant transfers
from an Offering under the 423 Component to an Offering under the Non-423 Component, the exercise of the Participant’s Option will
be qualified under the 423 Component only to the extent that such exercise complies with Section 423 of the Code. If a Participant transfers
from an Offering under the Non-423 Component to an Offering under the 423 Component, the exercise of the Participant’s Option will
remain non-qualified under the Non-423 Component. An employee will not be deemed to have terminated employment for this purpose if the
employee is on an approved leave of absence for military service or sickness or for any other purpose approved by the Company, if the
employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave
of absence was granted or if the Administrator otherwise provides in writing.


 






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13.             
 Special Rules and Sub-Plans. Notwithstanding anything herein to the contrary, the Administrator may adopt special rules
applicable to the employees of a particular Designated Subsidiary whenever the Administrator determines that such rules are necessary
or appropriate for the implementation of the Plan in a jurisdiction where such Designated Subsidiary has employees; provided that if such
special rules or sub-plans are inconsistent with the requirements of Section 423(b) of the Code, the employees subject to such special
rules or sub-plans will participate in the Non-423 Component. Any special rules or sub-plans established pursuant to this Section 13
shall, to the extent possible, result in the employees subject to such rules having substantially the same rights as other Participants
in the Plan.


 


14.             
Optionees Not Stockholders. Neither the granting of an Option to a Participant nor the deductions from his or her pay shall
constitute such Participant a holder of the shares of Common Stock covered by an Option under the Plan until such shares have been purchased
by and issued to the Participant.


 


15.             
Rights Not Transferable. Rights under the Plan are not transferable by a Participant other than by will or the laws of descent
and distribution, and are exercisable during the Participant’s lifetime only by the Participant.


 


16.             
Application of Funds. All funds received or held by the Company under the Plan may be combined with other corporate funds
and may be used for any corporate purpose.


 


17.             
Adjustment in Case of Changes Affecting Common Stock. In the event of a subdivision of outstanding shares of Common Stock,
the payment of a dividend in Common Stock or any other change affecting the Common Stock, the number of shares approved for the Plan and
any other share limitations in the Plan shall be equitably or proportionately adjusted to give proper effect to such event.


 






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18.             
 Amendment of the Plan. The Board may at any time and from time to time amend the Plan in any respect, except that without
the approval within twelve (12) months of such Board action by the stockholders, no amendment shall be made increasing the number of shares
approved for the Plan or making any other change that would require stockholder approval in order for the 423 Component of the Plan, as
amended, to qualify as an “employee stock purchase plan” under Section 423(b) of the Code.


 


19.             
Insufficient Shares. If the total number of shares of Common Stock that would otherwise be purchased on any Exercise Date
plus the number of shares purchased under previous Offerings under the Plan exceeds the maximum number of shares issuable under the Plan,
the shares then available shall be apportioned among Participants in proportion to the amount of payroll deductions accumulated on behalf
of each Participant that would otherwise be used to purchase Common Stock on such Exercise Date.


 


20.             
Termination of the Plan. The Plan may be terminated at any time by the Board. Upon termination of the Plan, all amounts
in the accounts of Participants shall be promptly refunded.


 


21.             
Governmental Regulations. The Company’s obligation to sell and deliver Common Stock under the Plan is subject to obtaining
all governmental approvals required in connection with the authorization, issuance, or sale of such stock.


 


22.             
Governing Law. This Plan and all Options and actions taken thereunder shall be governed by, and construed in accordance
with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be
governed by and construed in accordance with the internal laws of the State of Delaware, applied without regard to conflict of law principles.


 






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23.             
 Issuance of Shares. Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares
held in the treasury of the Company, or from any other proper source.


 


24.             
Tax Withholding. Participation in the Plan is subject to any minimum required tax withholding on income of the Participant
in connection with the Plan. Each Participant agrees, by entering the Plan, that the Company and its Subsidiaries shall have the right
to deduct any such taxes from any payment of any kind otherwise due to the Participant, including shares issuable under the Plan.


 


25.             
Notification Upon Sale of Shares Under the 423 Component. Each Participant agrees, by entering the 423 Component of the
Plan, to give the Company prompt notice of any disposition of shares purchased under the Plan where such disposition occurs within two
(2) years after the date of grant of the Option pursuant to which such shares were purchased or within one (1) year after the date such
shares were purchased.


 


26.             
Effective Date. This Plan shall become effective upon the date immediately preceding the date upon which the registration
statement on Form S-1 that is filed by the Company with respect to its initial public offering is declared effective by the Securities
and Exchange Commission following stockholder approval in accordance with applicable state law, the Company’s bylaws and articles
of incorporation, each as amended, and applicable stock exchange rules.


 






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APPENDIX A



Designated Subsidiaries


 


None




 






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