EXHIBIT 10.3

     

    RESTATED
AND AMENDED EMPLOYMENT AGREEMENT

    


    THIS
RESTATED AND AMENDED EMPLOYMENT AGREEMENT (this “Agreement”) is made
and entered into as of September 27, 2010 and restates and amends the Restated
and Amended Employment Agreement made as of July 22, 2010 (the “Prior Agreement”) by
and between  Steven C. Quay, M.D., Ph.D., an individual (“Employee”), and
Atossa Genetics, Inc. a Delaware corporation, having its principal office at
4105 E. Madison Street, Suite 320, Seattle, WA 98112 (the “Company”, and
collectively with Employee referred to herein as the “Parties,” and
individually, as a “Party”).

    


    RECITALS

    


    Whereas,
the Company is engaged in the commercialization of a patented, FDA approved
non-invasive test for the detection of pre-cancerous conditions that may lead to
breast cancer;

    


    Whereas,
the Company has not yet completed development of its infrastructure and is in
need of capital, management, infrastructure, accounting and various other
critical elements including management and negotiations with sophisticated
corporate entities and organizations;

    


    Whereas,
Employee is a founder of the Company;

    


    Whereas,
Employee desires to be employed by Company and Company desires to employ the
Employee on the terms provided herein;

    


    Whereas,
the Employee and the Company desire to amend and restate the
Prior  Agreement and to accept the terms and conditions hereof in lieu
of the terms and conditions provided under the Prior Agreement.

    


    AGREEMENT

    


    NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the Parties agree as follows:

     

    1.          Employment.  The
Company hereby hires and employs Employee as Chief Executive Officer of the
Company and Employee hereby accepts such employment with the Company on the
terms and conditions set forth herein.

     

    2.          Term &
Position.

     

    (a)           Employment
Term.  Subject to the terms and conditions set forth in Section
7 of this Agreement, the Employee and the Company
shall each have the right to terminate Employee’s employment
hereunder.  The term of Employee’s employment hereunder is referred to
herein as the “Employment
Term.”


    
      
         


      

      
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    (b)          Position.  During
the Employment Term, Employee shall be the Chief Executive Officer of the
Company and shall be appointed Chairman of the Board of Directors.

     

    3.          Duties and
Responsibilities.  Employee shall serve the Company diligently
and faithfully in the performance of his duties on the Company’s behalf, which
shall include duties and responsibilities as the Company may from time to time
reasonably prescribe consistent with the duties and responsibilities of the
Chief Executive Officer of the Company.  Employee and the Board of
Directors shall be responsible for strategy and tactics and for setting
corporate goals during the Employment Term, as and if appropriate.

     

    4.          Compensation.  For
services rendered to the Company pursuant to this Agreement, Employee shall be
entitled to receive the following cash and equity compensation:

     

    (a)           Base
Salary.  Employee shall be entitled to an initial base salary
of $250,000.00 per year, payable biweekly.  The Company may elect to accrue
payment of such base salary until the completion of a financing.

     

    (b)          Bonus.  Employee
shall be eligible to receive an annual cash performance bonus in an amount of up
to 40% of his then-current base salary, subject to the achievement of goals
established prospectively by the Compensation Committee of the board.  The
performance goals for 2010 will be set at the first board meeting following the
completion of the Company’s initial public offering.

     

    (c)           Equity.  The
Company will grant to Employee an option (the “Option”) to purchase
565,833 shares of common stock at an exercise price per share equal to the fair
market value per share on the date the option is granted, as determined by the
Board of Directors.  The Option will be subject to the terms and conditions
applicable to options granted under an equity incentive plan to be adopted by
the Board of Directors and stockholders of the Company (the “Plan”), and the
applicable stock option agreement pursuant to the Plan, which will include the
appropriate provisions contained in this Agreement.  25% of the shares of
common stock underlying the option, or 141,458 shares, will vest on December 31,
2010, and the remaining 75%, or 424,375 shares, will vest in equal quarterly
installments over the next three years, so long as Employee remains employed
with the Company.

     

    (d)           Change in
Control.  In the event of a Change in Control (as defined
below) during the Employment Term, Employee shall be entitled to receive a
one-time bonus equal to 2.9 (two and nine-tenths) times his then-current base
salary as set forth and determined above, or on any amendment to this Agreement,
and all then-unvested shares of restricted stock, warrants and/or employee stock
options, if any, then held by Employee shall accelerate and become fully vested
as of immediately prior to the completion of the Change in Control.  For
purposes hereof, a “Change in Control” shall mean:


    
      
         


      

      
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    (i)           merger
or consolidation in which (A) the Company is a constituent party or (B) a
Subsidiary of the Company is a constituent party and the Company issues shares
of its capital stock pursuant to such merger or consolidation, in each case
except any such merger or consolidation involving the Company or a Subsidiary in
which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or
exchanged for shares of capital stock that represent, immediately following such
merger or consolidation, at least a majority, by voting power, of the capital
stock of (1) the surviving or resulting corporation or (2) if the surviving or
resulting corporation is a wholly owned subsidiary of another corporation
immediately following such merger or consolidation, the parent corporation of
such surviving or resulting corporation; or

     

    (ii)          the
sale, lease, transfer, exclusive license or other disposition, in a single
transaction or series of related transactions, by the Company or any Subsidiary
of all or substantially all the assets of the Company and its Subsidiaries taken
as a whole, except where such sale, lease, transfer, exclusive license or other
disposition is to a wholly-owned subsidiary of the Company.

     

    5.          Fringe
Benefits.  During the Employment Term, the Company agrees to
make available the following fringe benefits to Employee in accordance with the
policies and plans adopted by the Company; said fringe benefits shall be no less
favorable to the Employee than those provided to other key employees and
officers of the Company.  To the extent such benefits are based on length
of service with the Company, Employee shall receive full credit for prior
service with the Company.

     

    (a)           Expenses.  Employee
shall be expected to incur various business expenses and other out-of-pocket
expenses customarily incurred by persons holding like positions, including but
not limited to traveling, entertainment and similar expenses incurred by
Employee in the performance of Employee’s services for the benefit of the
Company.  Company shall reimburse Employee for all reasonable business
expenses incurred or paid by Employee upon presentation of documentation
reasonably acceptable to the Company and subject to any reimbursement policy
adopted by the Company.

     

    (b)           Health
Insurance.  Participation in health, hospitalization,
disability, dental and other insurance plans that the Company may have in effect
for other executives, all of which shall be paid for by the Company with
contribution by the Employee as set for the other executives, as and if
appropriate.

     

    (c)           Vacation.  Employee
shall be entitled to six weeks of paid vacation per year for each full year of
employment and pro rata for each partial year. Vacation time not taken during a
calendar year is not accrued to the next calendar year.

     

    6.          Termination.  Either
the Company or Employee may terminate Employee’s employment by the Company at
the end of any calendar month, with or without “Cause” or “Good Reason” (as such
terms are defined below), in its or his sole discretion, upon thirty (30) days’
prior written notice of termination.  In addition, Employee’s employment by
the Company shall terminate upon the death or Disability (as defined below) of
Employee.  Termination of Executive’s employment as provided for
herein shall terminate the Employment Term.  For purposes of this
Agreement, in the case of a termination of Employee’s employment hereunder, the
following terms shall have the following meanings:


    
      
         


      

      
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    (a)           “Good Reason” shall
mean the Employee has complied with the Good Reason Process (as defined below)
following the occurrence of any of the following events: (i) a material
diminution in Employee’s responsibilities, authority or duties at the Company
that constitutes a demotion or (ii) a material diminution in Employee’s base
salary (other than a general reduction applicable to all executive employees of
the Company) (each, a “Good Reason
Condition”).

     

    (b)           “Good Reason Process”
means that (i) Employee reasonably determines in good faith that a Good Reason
Condition has occurred, (ii) Employee notifies the Company in writing of the
occurrence of the Good Reason Condition within 60 days after the first
occurrence of such condition; (iii) Employee cooperates in good faith with the
Company’s efforts, for a period not less than 30 days following such notice (the
“Cure Period”),
to remedy the Good Reason Condition; (iv) notwithstanding such efforts, the Good
Reason Condition continues to exist; and (v) Employee terminates his employment
within 60 days after the end of the Cure Period.  If the Company cures the
Good Reason Condition during the Cure Period, Good Reason will be deemed not to
have occurred.

     

    (c)           “Cause” shall mean:
(i) Employee’s willful and repeated failure reasonably to perform his duties
hereunder or to comply with any reasonable and proper direction given by the
Board if such failure of performance or compliance is not cured within thirty
(30) days following receipt by Employee of written notice from the Company
containing a description of such failures and non-compliance and a demand for
immediate cure thereof; (B) Employee being found guilty in a criminal court
of an offense involving moral turpitude; (C) Employee’s commission of any
material act of fraud or theft against the Company; or (D) Employee’s
material violation of any of the material terms, covenants, representations or
warranties contained in this Agreement if such violation is not cured within
thirty (30) days following receipt by Employee of written notice from the
Company containing a description of the violation and a demand for immediate
cure thereof.

     

    (d)           “Disability” shall
mean total and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended.


    
      
         


      

      
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    7.          Severance.  Subject
to Section 6 hereof, if (i) the Company terminates
the employment of Employee without Cause, or (ii) Employee terminates his
employment for Good Reason, then Employee shall be entitled to receive all of
his accrued and then-unpaid base salary, any bonus cash compensation earned by
Employee through the effective date of termination (determined at the maximum
annual rate for bonus cash compensation provided for above but on a pro-rated
basis for the portion of the fiscal year that shall have elapsed when the
termination occurs).  In addition, subject to Employee’s execution and
non-revocation of an agreement containing a release of any and all legal claims
and other termination-related provisions in a form acceptable to the Company
(the “Separation
Agreement”), Employee shall be entitled to receive upon such
termination an additional cash payment in the amount of twelve (12) months
of such base salary (the “Severance Payment”),
and notwithstanding the vesting and exercisability provisions otherwise
applicable to the options issued to Employee under prior agreements, the vesting
of all shares of common stock underlying such options shall accelerate as of the
effective date of such termination, and such options shall remain exercisable
for the remainder of their terms.  The Company shall pay the Severance
Payment in substantially equal installments over six (6) months (the “Severance Benefits
Period”) in accordance with the Company’s standard payroll practice, in
arrears beginning on the first payroll date that occurs following the thirtieth
(30th) day after the date on which Employee’s employment with the Company
terminates; provided,
that prior to such date, the Separation Agreement becomes effective. 
Solely for purposes of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), each
installment of the Severance Payment will be considered a separate
payment.  Notwithstanding the foregoing, the Company shall not be required
to pay any severance pay for any period following the effective date of
termination of Employee’s employment hereunder if Employee shall have materially
violated the provisions of Sections 3, 8, 10 or 11 of this Agreement and such violation is not cured
within thirty (30) days following receipt of written notice from the Company
containing a description of the violation and a demand for immediate
cure.

     

    8.          Noncompetition and
Non-Solicitation Commitment.  Employee hereby agrees as
follows:

     

    (a)           Agreement Not to
Compete.  Employee hereby covenants, and agrees that, during
the Employment Term and for a period of twelve (12) months thereafter, he shall
not within the United States directly or indirectly in any manner or capacity
(whether alone or as a partner, joint venturer, stockholder or investor,
creditor, principal, agent, advisor, employee, officer, director, licensor,
licensee, salesman, broker or representative, for any “Person” (defined as any
individual, corporation (including any non-profit corporation), general, limited
or limited liability partnership, limited liability company, joint venture,
estate, trust, association, organization, or other entity or governmental body),
or through any agency or by any other means whatsoever) engage in the Business
of the Company or any Subsidiary, except for on behalf of the Company or its
affiliates.  For purposes of the foregoing, the “Business of the Company,”
from time to time means the Company’s business as is described in Part I, Item 1
(“Description of Business”) of the Company’s then most recent Annual Report on
Form 10-K filed with the United States Securities and Exchange Commission, and
the term “Subsidiary” means a corporation or other entity that is at least
majority owned, directly or indirectly, by the Company.

     

    (b)           No
Interference.  Employee shall not take any action to interfere
with the relationships between the Company and its Affiliates, on the one hand,
and their customers on the other, during the Non-Compete Period.

     

    (c)           Indirect
Competition.  Employee further agrees that, during the
Non-Compete Period, he shall not, directly or indirectly, assist or encourage
any other Person in carrying out, directly or indirectly, any activity that
would be prohibited by the foregoing provisions of this Section 8 if such activity were carried out by
Employee.

     

    (d)           No
Solicitation.  Employee agrees that during the Non-Compete
Period, he will not, directly or indirectly, on behalf of himself or any other
Person, solicit the hiring of or hire, on any basis, any Person employed by the
Company or its Affiliates at the time of such solicitation.


    
      
         


      

      
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    9.          Reasonable Restriction;
Limits on Enforcement.

     

    (a)           The
parties hereto agree that the restrictions on the activities and business of
Employee provided for in this Agreement, and the duration and territorial scope
thereof, are, under all circumstances, reasonable and necessary to safeguard the
interests of the Company and its Affiliates and to protect the goodwill acquired
pursuant thereto.

     

    (b)           If
any court of competent jurisdiction shall refuse to enforce any or all of the
provisions hereof because the time limit applicable thereto is deemed
unreasonable, it is expressly understood and agreed that such provisions shall
not be void, but that for the purpose of such proceedings and in such
jurisdiction such time limitation shall be deemed to be reduced to the extent
necessary to permit enforcement of such provisions.

     

    (c)           If
any court of competent jurisdiction shall refuse to enforce any or all of the
provisions hereof because they are more extensive (whether as to geographical
area, scope of business or otherwise) than is deemed reasonable, it is expressly
understood and agreed that such provisions shall not be void, but that for the
purpose of such proceedings and in such jurisdiction, the restrictions contained
herein (whether as to geographic area, scope of business or otherwise) shall be
deemed to be reduced to the extent necessary to permit enforcement of such
provisions.

     

    (d)           The
existence of any claim or cause of action by Employee or any other Person
against the Company or its Affiliates shall not constitute a defense to the
enforcement of any provision hereof.

     

    (e)           Employee
expressly stipulates and agrees that this Agreement shall be construed in a
manner which renders its provisions valid and enforceable to the maximum extent
(not exceeding its express terms) permissible under applicable law.

     

    10.         Confidential
Information.

     

    (a)           For
purposes of this Section 10, the term “Confidential
Information” means, in addition to its meaning under applicable law,
information which is not generally known in the Company’s industry and which is
proprietary to the Company and which is subject to efforts by the Company to
maintain its confidentiality, including (i) trade secret information about
the Company, its customers and its products, and (ii) information relating
to the business of the Company as conducted at any time within the previous five
(5) years or anticipated to be conducted by the Company, and to any of its past,
current or anticipated products, including, without limitation, information
about the Company’s purchasing, accounting, marketing, selling, or
servicing.  “Confidential
Information” shall not include information that is, or thereafter by
legal means becomes, lawfully available from public sources or any information
that is required by a law or any competent administrative agency or judicial
authority to be disclosed, or the disclosure of which is otherwise reasonably
necessary or appropriate in connection with performance by Employee of his
duties under this Agreement.


    
      
         


      

      
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    (b)           Employee
shall not, either during the term of this Agreement or for a period one (1) year
following the expiration or termination of this Agreement, use Confidential
Information for any purpose other than the performance of his duties and
responsibilities under this Agreement or disclose any Confidential Information
to any Person not employed by the Company except with the prior written
authorization of the Company or as may be necessary for Employee to perform his
duties hereunder and shall exercise prudence and the same degree of care taken
by the Company to safeguard and protect, and to prevent the unauthorized
disclosure of, all such Confidential Information.

     

    (c)           Upon
expiration or termination of this Agreement, Employee shall turn over to a
designated representative of the Company all property in Employee’s possession
and custody and belonging to the Company and all tangible embodiments of
Confidential Information.  Employee shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs or other documents relating in any way to the affairs of the Company
and containing Confidential Information which came into Employee’s possession at
any time during the term of this Agreement.

     

    11.         Inventions and
Innovations.  Employee agrees to communicate to the Company,
promptly and fully, and to assign to the Company, all inventions, trade secrets,
and technical or business innovations, and all worldwide intellectual property
rights therein, developed or conceived solely by Employee, or jointly with
others, while employed by the Company, which were developed on the time of the
Company or in reliance on Confidential Information.  Employee further
agrees to execute all necessary papers and otherwise to assist the Company, at
the Company’s sole expense, to obtain patents or other legal protection as the
Company deems fit, and to assist in perfecting in the Company all rights granted
to it hereunder.  Both the Company and Employee intend that all original
works of authorship created by Employee while working in the employ of the
Company will be works for hire within the meaning of applicable copyright laws
and will be the sole and exclusive property of the Company.

     

    12.         Third Party
Beneficiaries.  Employee acknowledges and agrees that the
covenants contained in Sections 8 through 11 hereof are expressly intended to benefit the
Company and all of its Affiliates, and that for purposes of such sections the
term “Company” shall include all of Company’s Affiliates.

     

    13.         Survival.  The
covenants and agreements of the Employee set forth in Sections 8 through 12 shall remain
in effect and survive the termination of this Agreement for the respective
periods set forth therein.

     

    14.         Waiver.  No
waiver of any term, condition or covenant of this Agreement shall be deemed to
be a waiver of subsequent breaches of the same or other terms, covenants or
conditions hereof.

     

    15.         Amendment.   This
Agreement may not be amended, altered or modified except by a written agreement
between the parties hereto.


    
      
         


      

      
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    16.         Assignability.  Employee
may not assign this Agreement to any third party for whatever purpose without
the express written consent of the Company, other than as specifically
authorized herein.  The Company may not assign this Agreement to any third
party without the express written consent of Employee except by operation of
law, or through merger, liquidation, recapitalization or sale of all or
substantially all of the assets of the Company, provided that the Company may
assign this Agreement at any time to an Affiliate of the Company.

     

    17.         Invalidity.  In
the event part or any portion of this Agreement is determined in a legally
binding manner to be invalid and unenforceable, the parties agree that this
Agreement as so construed shall remain in force and effect between them and
applied as if the offending part or portion did not comprise an element
hereof.

     

    18.         Severability.  If
any particular provision of this Agreement shall be determined to be invalid or
unenforceable, the parties expressly authorize the court or other tribunal
making such a determination to edit the invalid or unenforceable provision to
allow this Agreement, and the provisions thereof, to be valid and enforceable to
the fullest extent allowed by applicable law.

     

    19.         Entire
Agreement.  This Agreement contains the entire agreement of the
parties relative to the subject matter of this Agreement and there is no
provision, condition or understanding relative to the employment of Employee
outside this Agreement.

     

    20.         Notices.  Any
notice required to be given hereunder shall be duly and properly given,
effective as of the date of mailing, if mailed postage prepaid to either party
at the addresses set forth below, or to such other address as such party may
subsequently notify to the other.

     

    
      	
              If
      to Employee:

            	
              Steven
      C. Quay, MD, PhD

            
	 
      	
              4105
      E. Madison Street, Suite 320

            
	 
      	
              Seattle,
      WA 98112

            
	 
      	 
      
	
              If
      to Company:

            	
              Atossa
      Genetics, Inc.

            
	 
      	
              Attn:  Directors

            
	 
      	
              4105
      E. Madison Street, Suite 320

            
	 
      	
              Seattle,
      WA 98112

            


    

    


    21.         Governing
Law.  This Agreement shall be governed by and construed under
the internal laws of the State of Washington, without regard to the principles
of comity and/or the applicable conflicts of laws of any state that would result
in the application of any laws other than the State of Washington.

     

    22.         Jurisdiction &
Arbitration.  The validity, performance and interpretation of
the Agreement shall be governed by the laws of the State Washington, without
regard to its conflicts of law rules. Any dispute or claim arising under or with
respect to this Agreement, which is incapable of resolution, will be resolved by
arbitration before one (1) arbitrator in Seattle, Washington, in accordance with
the Rules for Commercial Arbitration of the American Arbitration Association
("AAA"). The
appointing agency shall be the AAA and the arbitrator shall apply Washington
State law to both interpret this Agreement and fashion an
award.


    
      
         


      

      
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    23.         Tax
Matters.

     

    (a)           The
parties intend that this Agreement be administered in accordance with Section
409A of the Code.  To the extent that any provision of this Agreement is
ambiguous as to its compliance with, or exemption from, Section 409A of the
Code, the provision will be read in such a manner so that all payments hereunder
either comply with, or are exempt from, Section 409A of the Code.  The
Parties agree that this Agreement may be amended as reasonably requested by
either Party, and as may be necessary to fully comply with Section 409A of the
Code and all related rules and regulations in order to preserve the payments and
benefits provided hereunder without additional cost to either party.  The
Company makes no representation or warranty and will have no liability to
Employee or any other person if any provisions of this Agreement are determined
to constitute deferred compensation subject to Section 409A of the Code but do
not satisfy an exemption from, or the conditions of, such Section.

     

    (b)           Anything
in this Agreement to the contrary notwithstanding, if at the time of Employee’s
“separation from service” within the meaning of Section 409A of the Code, the
Company determines that Employee is a “specified employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit
that Employee becomes entitled to under this Agreement on account of his
separation from service would be considered deferred compensation subject to the
20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment
shall not be payable and such benefit shall not be provided until the date that
is the earlier of (A) six months and one day after Employee’s separation from
service or (B) Employee’s death.  If any such delayed cash payment is
otherwise payable on an installment basis, the first payment shall include a
catch-up payment covering amounts that would otherwise have been paid during the
six-month period but for the application of this provision, and the balance of
the installments will be payable in accordance with their original
schedule.

     

    (c)           To
the extent that any payment or benefit described in this Agreement constitutes
“non-qualified deferred compensation” under Section 409A of the Code, and to the
extent that such payment or benefit is payable upon Employee’s termination of
employment, then such payments or benefits shall be payable only upon Employee’s
“separation from service.”  The determination of whether and when a
separation from service has occurred shall be made in accordance with the
presumptions set forth in Treasury Regulation Section 1.409A 1(h).

     

    (d)           All
in-kind benefits provided and expenses eligible for reimbursement under this
Agreement shall be provided by the Company or incurred by Employee during the
time periods set forth in this Agreement.  All reimbursements shall be paid
as soon as administratively practicable, but in no event shall any reimbursement
be paid after the last day of the taxable year following the taxable year in
which the expense was incurred.  The amount of in-kind benefits
provided or reimbursable expenses incurred in one taxable year shall not affect
the in-kind benefits to be provided or the expenses eligible for reimbursement
in any other taxable year.  Such right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another
benefit.


    
      
         


      

      
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    24.          Counterparts and Electronic
Signatures.  This Agreement may be executed in two or more
counterparts and by facsimile or any electronic means, each of which shall be
deemed an original but all of which together shall constitute one and the same
Agreement.

     

    [SIGNATURE
PAGE FOLLOWS]


    
      
         


      

      
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    IN
WITNESS WHEREOF, the parties have executed this Agreement as of September 27,
2010.

    


    
      
        
          	
                  COMPANY:

                	 	
                  EMPLOYEE:

                
	 
      	 	 
      
	
                  Atossa
      Genetics, Inc.

                	 	 
      
	 
      	 	 
      
	
                  By: 

                	
                  /s/ John Barnhart

                	 	
                  By: 

                	
                  /s/ Steven C. Quay

                
	 
      	
                  John
      Barnhart

                	 	 
      	
                  Steven
      C. Quay, M.D., Ph.D.

                
	 
      	
                  Director,
      Board of Directors

                	 	 
      


        

      

    

    


    [SIGNATURE
PAGE TO EMPLOYMENT AGREEMENT]