Exhibit 10.4


 


AEROVATE
THERAPEUTICS, INC.


 


NON-EMPLOYEE DIRECTOR COMPENSATION POLICY


 


The purpose of this Non-Employee Director Compensation Policy
(the “Policy”) of Aerovate Therapeutics, Inc. (the “Company”) is to provide a total compensation package that
enables the Company to attract and retain, on a long-term basis, high-caliber directors who are not employees or officers of the Company
or its subsidiaries (“Outside Directors”). This Policy will become effective as of the effective
time of the registration statement for the Company’s initial public offering of its equity securities (the “Effective Date”).
In furtherance of the purpose stated above, all Outside Directors shall be paid compensation for services provided to the Company
as set forth below:


 


Cash Retainers


 


Annual Retainer for Board Membership: $35,000 for
general availability and participation in meetings and conference calls of our Board of Directors, to be paid quarterly in arrears, pro-rated
based on the number of actual days served by the director during such calendar quarter. No additional compensation will be paid for attending
individual meetings of the Board of Directors.


 


	Additional Annual Retainer for Non-Executive
    Chair:	 	$	30,000	 
	 	 	 	 	 
	Additional Annual Retainers for Committee Membership:	 	 	 	 
	 	 	 	 	 
	Audit Committee Chair:	 	$	15,000	 
	 	 	 	 	 
	Audit Committee member:	 	$	7,500	 
	 	 	 	 	 
	Compensation Committee Chair:	 	$	10,000	 
	 	 	 	 	 
	Compensation Committee member:	 	$	5,000	 
	 	 	 	 	 
	Nominating and Corporate Governance Committee Chair:	 	$	8,000	 
	 	 	 	 	 
	Nominating and Corporate Governance Committee member:	 	$	4,000	 




 



Chair and committee member retainers are in addition to retainers
for members of the Board of Directors. No additional compensation will be paid for attending individual committee meetings of the Board
of Directors.


 


Notwithstanding the foregoing, each Outside Director may
elect to receive the entirety of the aforementioned cash retainers in the form of an option to acquire common stock of the Company,
with an aggregate Value equal to such cash retainer (or portion thereof) to be received by such Outside Director. Any such stock
options shall vest in four equal quarterly instalments commencing on the date of grant and shall expire ten years from the date of
grant. Any such election (i) shall be made (x) for any continuing Outside Director, before the start of the calendar year with
respect to any cash compensation for such calendar year and (y) for any new Outside Director, within 30 days of her or his election
to the Board, (ii) shall be irrevocable with respect to such calendar year and (iii) shall automatically apply to the cash
compensation for each subsequent calendar year unless otherwise revoked prior to the start of such calendar year.


 






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Equity Retainers


 


Initial Award: An initial, one-time stock option award
(the “Initial Award”) to purchase/covering 25,000 shares will be granted to each new Outside Director upon his or her
election to the Board of Directors, which shall vest in equal monthly installments over three years from the date of grant, provided,
however, that all vesting shall cease if the director resigns from the Board of Directors or otherwise ceases to serve as a director of
the Company, unless the Board of Directors determines that the circumstances warrant continuation of vesting. The Initial Award shall
expire ten years from the date of grant, and shall have a per share exercise price equal to the Fair Market Value (as defined in the Company’s
2021 Stock Option and Incentive Plan) of the Company’s common stock on the date of grant. This Initial Award applies only to Outside
Directors who are first elected to the Board of Directors subsequent to the Effective Date.


 


Annual Award: On each date of each Annual Meeting of
Stockholders of the Company following the Effective Date (the “Annual Meeting”), each continuing Outside Director, other than
a director receiving an Initial Award, will receive an annual stock option award (the “Annual Award”) to purchase/covering
12,500 shares, which shall vest in full upon the earlier of (i) the first anniversary of the date of grant or (ii) the date of the
next Annual Meeting; provided, however, that all vesting shall cease if the director resigns from the Board of Directors or otherwise
ceases to serve as a director, unless the Board of Directors determines that the circumstances warrant continuation of vesting. Such Annual
Award shall expire ten years from the date of grant, and shall have a per share exercise price equal to the Fair Market Value (as defined
in the Company’s 2021 Stock Option and Incentive Plan) of the Company’s common stock on the date of grant.


 


Sale Event Acceleration: All outstanding Initial Awards and
Annual Awards held by an Outside Director shall become fully vested and exercisable upon a Sale Event (as defined in the Company’s
2021 Stock Option and Incentive Plan).


 


Value: For purposes of this Policy, “Value” means
the grant date fair value of the option (i.e., Black-Scholes Value) determined in accordance with the reasonable assumptions and methodologies
employed by the Company for calculating the fair value of options under Financial Accounting Standard Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 718.


 


Expenses


 


The Company will reimburse all reasonable out-of-pocket
expenses incurred by non-employee directors in attending meetings of the Board of Directors or any committee thereof.


 





Maximum Annual Compensation


 


The aggregate amount of compensation,
including both equity compensation and cash compensation, paid by the Company to any Outside Director for service as an Outside Director
in a calendar year for services as an Outside Director period shall not exceed $750,000; provided, however, that such amount shall be
$1,000,000 for the calendar year in which the applicable Outside Director is initially elected or appointed to the Board of Directors;
(or such other limits as may be set forth in Section 3(b) of the Company’s 2021 Stock Option and Incentive Plan or any similar provision
of a successor plan). For this purpose, the “amount” of equity compensation paid in a calendar year shall be determined based
on the grant date fair value thereof, as determined in accordance with FASB ASC Topic 718 or its successor provision, but excluding the
impact of estimated forfeitures related to service-based vesting conditions.


 


Adopted June 17, 2021.


 






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