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Preheat oven to 425 degrees and grease a 9 x13 inch baking pan.
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Place chicken breasts between two pieces of wax paper and pound until about a 1/2 inch thick.
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Dredge chicken breasts in flour.
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Combine bread crumbs, grated parmesan, Italian seasoning, salt and pepper.
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Beat egg with water until frothy then dip coated chicken breasts in egg, then dredge in bread crumb mixture.
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Heat oil in a non-stick pan until hot, but not smoking.
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Saute chicken breasts in hot oil until golden brown, about 2-3 minutes per side. Season with salt and pepper.
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Pour one cup tomato sauce into bottom of the prepared baking dish and lay chicken breasts in the dish.
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Top with tomato sauce, then mozzarella, parmesan and 2 Tbsp basil.
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Bake for about 15 minutes, until hot and bubbly.
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You can place it under the broiler for another minute or two to reach the desired color.
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Top with remaining basil and serve.