AMENDED AND RESTATED EMPLOYMENT AGREEMENT #2 OF THOMAS P. FINN

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) dated as of November 13, 2008 by and between Advance Nanotech, Inc., a Delaware corporation (the "Company"), and Thomas Finn (the "Executive").

WHEREAS, Executive has continuously served as an employee of the Company pursuant to an Employment Agreement dated as of February 28, 2005 and an Amended and Restated Employment Agreement dated as of August 13, 2007 (collectively, the “Prior Agreement”);

WHEREAS, (i) the relocation of the Company’s headquarters to Montebello, New York gave the Executive the right under the Prior Agreement to terminate his employment with the Company for “Good Reason” (as defined therein) and (ii) the issuance of equity interests in the Company pursuant to the Exchange Agreement dated as of December 19, 2007 (the “Exchange Agreement”) by and among certain stockholders of Owlstone Nanotech, Inc. and the Company and the Subscription Agreements (the “Subscription Agreements”) by and among the Company and certain subscribers to the Company’s securities gave the Executive the right under the Prior Agreement to declare that his employment with the Company had been terminated as a result of a “Change in Control” (as defined therein);

WHEREAS, Company and Executive desire to amend and restate the Prior Agreement as provided herein;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and the mutual benefits herein provided, the receipt and sufficiency of which is hereby acknowledged, and intending to be bound thereby and hereby, the Company and Executive agree to amend, restate and supersede the Prior Agreement as follows:

1.             Representations and Warranties.   The Executive represents and warrants to the Company that Executive is not bound by any restrictive covenants and has no prior or other obligations or commitments of any kind that would in any way prevent, restrict, hinder or interfere with Executive's acceptance of continued employment or the performance of all duties and services hereunder to the fullest extent of the Executive's ability and knowledge.  The Executive agrees to indemnify and hold harmless the Company for any liability the Company may incur as the result of the existence of any such covenants, obligations or commitments.

2.             Term of Employment.   The Company will continue to employ the Executive and the Executive accepts continued employment by the Company on the terms and conditions herein contained for a period (the "Employment Period") provided in paragraph 5.

3.           Duties and Functions.

(a)           (1)           The Executive shall be employed as the Chief Financial Officer of the Company. The Executive shall report directly to the Chief Executive Officer of the Company and to the Board of Directors (the “Board”) of the Company.

(2)           The Executive agrees to undertake the duties and responsibilities inherent in the position of Chief Financial Officer of the Company. The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company of which the Executive has notice and any change thereof which may be adopted at any time by the Company.

(b)           During the Employment Period, the Executive will not engage in consulting work or any trade or business that is a competitor of the Company or to the extent that the same significantly interferes with the performance of the Executive’s duties hereunder, it being understood, however, that the Executive will be performing assignments for, and may be an officer or director of, entities in which the Company has an equity interest, without additional compensation unless otherwise specifically agreed. In no event shall it be a violation of this Agreement for the Executive to (i) serve on corporate, civic or charitable boards or committees or perform functions for such organizations, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities to the Company in accordance with this Agreement.  Subject to customary business travel, the Executive's duties ordinarily will be performed by the Executive in the course of the Executive's regular presence during normal working hours on business days Monday through Friday the Company’s principal executive offices at 400 Rella Blvd, Suite 160, Suffern, NY 10901, or at such other location to which the same may be relocated within a 60 mile radius of New York City.

4.           Compensation.

(a)            Base Salary :  As compensation for the Executive’s services to the Company hereunder, during the Executive's employment as Chief Financial Officer of the Company, the Company agrees to pay the Executive a base salary at the rate of Two Hundred and Fifty Thousand Dollars ($250,000) per annum (pro rated for periods of less than an entire calendar year), payable in equal installments in accordance with the Company's normal payroll schedule but in no event less often than once per month on substantially the same day each month.  The Company may withhold from any amounts payable under this Agreement such federal, state, local or other taxes as shall be required to be withheld pursuant to any applicable law or regulation..

(b)            Options/Equity Grants :  Executive shall be eligible to receive stock options/equity grants in securities of the Company from time to time, which grants, if any, shall be at the discretion of the Board or its designee (including, without limitation, the Compensation Committee), provided that the Board or its designee shall consider the granting of such compensation at least annually.  The terms and conditions governing eligibility for, entitlement to, and receipt of any options or other form of equity in the Company shall be governed by the Company’s incentive compensation programs, as the same may exist in writing from time to time.

Unless otherwise agreed in writing, such options, and the shares underlying such options, are not registered under federal, state or other securities laws, and shall be “restricted” within the meaning of applicable securities laws, and legended accordingly.  The Company shall have no obligation to register such options, and shall have no obligation to register the shares underlying such options; provided , that the Executive shall have registration rights with respect to the shares underlying such options which are substantially the same as the registration rights of any other Executive or director of the Company in respect of the Company’s shares. In addition to such other stock options/equity grants at the discretion of the Board or its designee, the Company shall grant to the Executive an option to purchase 350,000 shares of the common stock in the Company for $0.25 per share, such option to be fully vested as of the date hereof and to provide for cashless exercise. Additionally, the Company shall issue to the Executive 650,000 restricted common stock shares, such restricted shares to be fully vested with respect to 406,250 shares as of the date hereof and to become vested with respect to 81,250 of the remaining 243,750 shares on each of February 13, May 13 and August 13, 2009.

(c)            Other Expenses :  In addition to the compensation provided for above, the Company agrees to pay or to reimburse the Executive in timely fashion for all reasonable, ordinary and necessary, properly vouchered, client-related business or entertainment expenses incurred in the performance of the Executive’s services hereunder in accordance with Company policy in effect from time to time, provided, however, that the amount available to the Executive for such travel, entertainment and other expenses may require advance approval by President or Chief Executive Officer of the Company or such officer’s designee(s) in accordance with the Company’s reimbursement policies, as the same may be established by the Company’s Board of Directors from time to time.  The Executive shall submit reasonable substantiation in the form of vouchers and receipts for all expenses for which reimbursement is sought.

(d)            Commuting :  The Company will pay the Executive an additional Five Hundred Dollars ($500) per month, in arrears, as a non-accountable reimbursement for commuting expenses.

(e)            Vacation :  The Executive shall be allowed up to the greater of Four (4) weeks of paid vacation during each calendar year or such greater amount of paid vacation as is generally permitted by the Company to its senior executives, with no carry-over of accrued vacation from year to year.

(f)            Medical and Dental Insurance :

(i)           As promptly as practicable and, in any event, within 45 days of the date of this Agreement, the Company, at its expense, subject to availability, shall establish, and shall thereafter maintain insurance plans to provide the Executive and the Executive’s spouse and the Executive’s children of age 25 or younger with medical (including such customary items as preventive care, diagnostic services, hospital care, physician charges, emergency care, maternity, infertility/sterilization, organ transplants, extended care services, mental health and substance abuse, miscellaneous items and prescription drugs) and dental insurance.  

Subject to availability, it is contemplated that the medical insurance shall be on a Preferred Provider Organization (PPO) basis, with a small annual deductible and payment of 100% of the allowed benefit amount after payment of a small copay (approximately $25-$50 in most cases) for in-network matters, and a small annual deductible and payment of approximately 60-80% of the allowed benefit amount for out-of-network matters, with no requirement to select a primary care physician or obtain a referral to see a specialist.  Notwithstanding the foregoing, coverage shall be subject to customary required physicals to the extent required by the plan provider and to customary determinations of insurability by providers.  Subject to availability, it is contemplated that the dental insurance shall be on a Passive Preferred Provider Organization basis, with a small annual deductible, with no office visit copay and an annual benefit maximum of $2000 or less, with insurance reimbursements ranging up to approximately 100% for preventive, up to approximately 80% for basic procedures, and up to approximately 50% for major procedures.  Furthermore, in no event during the term of this Agreement shall the Company be required to pay premiums per month for such medical and dental coverage of the Executive and the Executive’s family group in excess of One Hundred Fifty Percent (150%) of the premiums paid by the Company at the inception of such coverage pursuant to this Agreement.  By way of example, if the Company paid One Dollar ($1.00) in premiums at the outset, it would not be obligated to pay more than One Dollar and Fifty Cents ($1.50) in premiums per month during this term of this Agreement.

(ii)           During any period from the commencement date of the term of employment under this Agreement in which the medical and dental plans have not yet been established or are not being maintained by the Company, the Company shall reimburse the Executive for the monthly premiums paid by the Executive for comparable coverage, up to $2500 per month and no more.

(h)            Other Company Benefits :  In addition to the Executive’s compensation provided by the foregoing, the Executive shall be entitled to participate in the other benefit programs, if any, available generally to executives of the Company generally pursuant to Company programs, including, by way of illustration, personal leave, paid holidays, sick leave, bonus, profit-sharing, stock option plans, retirement, 401K, disability, dental, vision, group sickness, accident, life or health insurance programs of the Company which may now or, if not terminated, shall hereafter be in effect, or in any other or additional such programs which may be established by the Company, as and to the extent any such programs are or may from time to time be in effect, as determined by the Company and the terms hereof, subject to the applicable terms and conditions of the benefit plans in effect at that time.

5.           Employment Period; Termination.

(a)            Commencement of Employment .   The Executive's employment  commenced on February 28, 2005 and has continued under the Prior Agreement unabated until the date hereof.

(b)            Employment Period .   The Employment Period under this Agreement shall commence on the date hereof and shall continue until terminated upon the earlier to occur of the following events:  (i) the close of business on the First  (1 ^st ) anniversary of the date hereof (the “Initial Term”) or (ii) the death or permanent disability (as defined in Paragraph 5 (h)) of the Executive, provided , however , that, on the First  (1 ^st ) anniversary of the date hereof, and on every subsequent annual anniversary, and unless either party has given the other party written notice of termination at least one year prior to such anniversary date, the term of this Agreement and the Employment Period shall be renewed for a term ending one (1) year subsequent to such date, unless sooner terminated as provided herein (the “Renewal Term”).  The Initial Term plus any Renewal Terms shall be included in the “Employment Period.”

(c)            Termination By Executive Without Good Reason .   Notwithstanding the provisions of paragraphs 5(a) and (b) above, the Executive may terminate the employment relationship at any time pursuant to this paragraph 5(c) for any reason or no reason by giving the Company written notice at least one year prior to the effective date of termination. The Company, at its election, may (i) require Executive to continue to perform the Executive’s duties hereunder for the full one year notice period, or (ii) terminate Executive’s employment at any time during such one year notice period.  An election by the Company to terminate Executive’s employment at any time during such one year notice period shall not be deemed to be a termination of Executive’s employment by the Company without Cause or a termination of Executive’s employment by the Company for Cause, but shall be treated as a Termination by Executive Without Good Reason.  If the Executive's employment is terminated by the Company pursuant to this paragraph 5(c) before the one year notice period has expired without cause, the Executive shall continue to receive the Executive’s base salary and bonus, and the Company shall continue medical and dental benefits for the Executive and the Executive’s family, by paying the premium for health insurance continuation coverage under COBRA for the Executive and the Executive’s eligible family to the extent the Executive elects COBRA coverage (or continue to contribute the employer portion of the premium normally paid by the Company for its current employees), for a period of time (the “Severance Period”) which shall be determined as set forth in the next sentence. The Severance Period under those circumstances shall consist of the unexpired balance of the one year notice period pursuant to this paragraph 5(c).   The sum, if any, payable to the Executive in respect of the Severance Period shall be payable in equal monthly installments on the Fifteenth (15 ^th ) day of each month in the Severance Period.  All other compensation and benefits paid by the Company to the Executive shall cease upon the Executive’s last day of employment, except such benefits as may be required to be extended under applicable state or Federal law. The Executive acknowledges and agrees that the non-compete restrictions set forth in Section 7 of this Employment Agreement will remain in full force and effect for the twelve (12) month period after the termination of the Executive’s employment. Furthermore, the obligations imposed on Executive with respect to confidentiality, non-disclosure and assignment of rights to inventions or developments in this Agreement or any other agreement executed by the parties shall continue, notwithstanding the termination of the employment relationship between the parties.

The salary, bonus (if any) and health insurance benefits to be provided under this paragraph 5(c) are sometimes hereinafter referred to as "Termination Compensation."  The Executive shall not be entitled to any Termination Compensation pursuant to this paragraph 5(c) unless the Executive executes and delivers to the Company after a notice of termination a release in form and substance reasonably satisfactory to the Company by which the Executive releases the Company from any obligations and liabilities of any type whatsoever under this Agreement, except for the Company's obligations with respect to the Termination Compensation, which release shall not affect the Executive’s right to indemnification, if any, for actions taken within the scope of the Executive’s employment or the Executive’s rights in respect of the Executive’s vested stock options, if any.  The parties hereto acknowledge that the Termination Compensation to be provided under this paragraph 5(c) is to be provided in consideration for the above-specified release. The Executive will not be entitled to and shall not receive any other compensation or benefits of any type following the effective date of termination, except such benefits as may be required to be extended under applicable state or Federal law.

(d)            Termination by Executive for “Good Reason” .   Subject to the provisions outlined below, at any time after the date Executive commences employment under this Agreement, upon thirty (30) days’ prior written notice to the Company of the Executive’s intent to terminate the Agreement, Executive shall have the right to terminate the Executive’s employment under this Agreement for “Good Reason” (as defined below).  For purposes of this Agreement, “Good Reason” is defined as any one of the following: (i) Company’s material breach of this Agreement; or (ii) relocation of the Company’s headquarters and/or Executive’s regular work address to a location which is more than Sixty (60) miles from the Borough of Manhattan, New York City, without Executive’s prior written consent; provided, however , that it shall not constitute Good Reason unless Executive shall have provided the Company with written notice of its alleged actions constituting Good Reason (which notice shall specify in reasonable detail the particulars of such Good Reason) and Company has not cured any such alleged Good Reason or substantially commenced its effort to cure such breach within Seven (7) days of Company’s receipt of such written notice and thereafter continues to pursue such cure with reasonable diligence. A termination for Good Reason shall be treated for all severance purposes as a Termination by the Company “Without Cause,” and Executive shall entitled to receive all of the payments and benefits identified in paragraph 5(f) on the terms and conditions set forth in paragraph 5(f).

(e)            Termination By Company For Cause .   If the Executive's employment is terminated for “cause," the Executive will not be entitled to and shall not receive any compensation or benefits of any type following the effective date of termination, except such benefits as may be required to be extended under applicable state or Federal law. As used in this Agreement, the term "cause" shall include but not necessarily be limited to (i) conviction of a felony or a crime involving moral turpitude; (ii) engagement in conduct which has the effect, or might reasonably be expected to have the effect of bringing disrepute to the Company’s reputation or hold the Company or the Executive up to public ridicule; (iii) fraud on or misappropriation of any funds or property of the Company, any affiliate, customer or vendor; (iv) willful violation of any securities law, rule or regulation (other than minor traffic violations or similar offenses); (v) personal dishonesty, or breach of fiduciary duty which involves personal profit; (vi) gross incompetence in the performance of the Executive’s duties under this Agreement; (vii) willful misconduct in connection with the Executive’s duties; (viii) habitual absenteeism or inattention to the Executive’s duties; (ix) chronic use of alcohol, drugs or other similar substances (other than pursuant to medical prescriptions and under doctors’ supervision for treatment of legitimate illnesses or conditions) which affects the Executive’s work performance;

(x) willful violation of any Company rule, regulation, procedure or policy which has, or may reasonably be expected to have, a material adverse effect on the Company; (xi) engaging in behavior that would constitute grounds for liability for harassment (as proscribed by the U.S. Equal Employment Opportunity Commission Guidelines or any other applicable state or local regulatory body) or other egregious conduct that violates laws governing the workplace; or (xii) material breach of any material provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by the Executive for the benefit of the Company (including, without limitation, such provisions within this Agreement) or of any material Company policy, all as determined by the Board, which determination will be conclusive.  Notwithstanding anything to the contrary, employment may not be terminated for “cause” in the event that the Executive becomes permanently disabled as set forth in paragraph 5(h) or dies.  Anything herein to the contrary notwithstanding, the Company shall give the Executive written notice prior to terminating the Executive's employment for “cause” under any circumstance in which the conduct constituting “cause” is reasonably open to cure (for instance, by way of illustration, where the “cause” does not involve a violation of trust or otherwise adversely affect the relationship between the Executive and the Company on a going-forward basis or involve commission of an act, such as a felony, or an unauthorized disclosure of confidential material, or an act which may constitute illegal harassment under laws governing the workplace, which can’t be undone), setting forth in reasonable detail the nature of any alleged breach and the conduct required to cure such breach.  If, and only if, the nature of the breach is such that the breach is reasonably open to cure, then the Executive shall have fourteen (14) days from the giving of such notice within which to cure.

The Executive acknowledges and agrees that the non-compete restrictions set forth in Section 7 of this Employment Agreement will remain in full force and effect for the Twelve (12) month period subsequent to the Executive’s termination for cause.  Furthermore, the obligations imposed on Executive with respect to confidentiality, non-disclosure and assignment of rights to inventions or developments in this Agreement or any other agreement executed by the parties shall continue, notwithstanding the termination of the employment relationship between the parties.

(f)            Termination By Company Without Cause .   The Company shall retain the right to terminate the Executive without cause or prior written notice, although the Company may give notice pursuant to this paragraph 5(f) in its sole discretion.  If the Executive's employment is terminated by the Company without cause pursuant to this paragraph 5(f), the Executive shall continue to receive the Executive’s base salary and bonus, and the Company shall continue medical and dental benefits for the Executive and the Executive’s family, by paying the premium for health insurance continuation coverage under COBRA for the Executive and the Executive’s eligible family to the extent the Executive elects COBRA coverage (or continue to contribute the employer portion of the premium normally paid by the Company for its current employees), for a Severance Period which shall be determined as set forth in the next sentence.  The Severance Period shall consist of the lesser of one year from the earlier to occur of the date (i) notice of termination is given pursuant to this paragraph 5(f) or (ii) the date on which employment actually terminates pursuant to this paragraph 5(f).  

The Executive acknowledges and agrees that the non-compete restrictions set forth in Section 7 of this Employment Agreement will remain in full force and effect for the greater of the Severance Period or the Twelve (12) month period subsequent to the Executive’s termination.  The sum, if any, payable to the Executive in respect of the Severance Period shall be payable in equal monthly installments on the Fifteenth (15 ^th ) day of each month in the Severance Period.  Furthermore, the obligations imposed on Executive with respect to confidentiality, non-disclosure and assignment of rights to inventions or developments in this Agreement or any other agreement executed by the parties shall continue, notwithstanding the termination of the employment relationship between the parties.

The salary, bonus (if any) and health insurance benefits to be provided under this paragraph 5(f) are sometimes hereinafter referred to as "Termination Compensation."  The Executive shall not be entitled to any Termination Compensation unless the Executive executes and delivers to the Company after a notice of termination a release in form and substance reasonably satisfactory to the Company by which the Executive releases the Company from any obligations and liabilities of any type whatsoever under this Agreement, except for the Company's obligations with respect to the Termination Compensation, which release shall not affect the Executive’s right to indemnification, if any, for actions taken within the scope of the Executive’s employment or the Executive’s rights in respect of the Executive’s vested stock options, if any.  The parties hereto acknowledge that the Termination Compensation to be provided under this paragraph 5(f) is to be provided in consideration for the above-specified release. The Executive will not be entitled to and shall not receive any other compensation or benefits of any type following the effective date of termination, except such benefits as may be required to be extended under applicable state or Federal law.

(g)            Termination By Virtue of A Change In Control .  The Executive may elect in writing to declare that he has been terminated as a result of a Change in Control (as hereafter defined), at which time the Executive shall be entitled to: (i) a lump sum severance payment equal to his base salary earned over the preceding twelve-month period; and (ii) a sum sufficient to pay for the continuation of his medical and dental insurance with all of his then current benefits for a like twelve-month period.  For the purpose of this provision, the term “Change in Control” includes: (i) a buy-out of the Company whereby more than 50% in the aggregate of the ownership interests of the Company becomes beneficially owned by persons not now holding an ownership interest; (ii) the liquidation or dissolution of the Company; or (iii) the sale or other disposition of all or substantially all of the Company’s assets.

(h)            Termination for Executive’s Permanent Disability .   To the extent permissible under applicable law, in the event the Executive becomes permanently disabled during employment with the Company, the Company may terminate th