In a large saute pan heat a 2-count of oil (about 2 tablespoons) over medium heat. When the oil is hot and hazy, add the onion, garlic, and bay leaves; cook and stir for 5 minutes until fragrant and soft. Hand tear half of the basil leaves. Add the olives and hand-torn basil. Carefully add the tomatoes; cook and stir about 15 minutes until the liquid is cooked down and the sauce is thick. Season with sugar, salt, and pepper. Lower the heat, cover, and keep warm.

Preheat oven to 450 degrees F. Set chicken breasts on a cutting board and cover with plastic wrap. Pound the chicken breasts with the flat side of a meat mallet until they are about 1/2 inch thick. Put the flour on a large shallow plate; season flour with salt and pepper. Combine the eggs and water in a wide bowl and beat until frothy. Put the bread crumbs on another large plate and season with salt and pepper.

In a large ovenproof saute pan heat a 3-count of oil (about 3 tablespoons) over medium-high heat. Lightly dredge both sides of the chicken cutlets in the seasoned flour, then dip them in the egg wash to coat completely, letting the excess drip off. Finally, dredge the cutlets in the bread crumbs. When the oil in the skillet is hot, add the cutlets and saute for 4 minutes on each side, until golden and crusty, turning once.

Set aside 1 cup of the tomato-olive sauce. Pour the remaining sauce over the chicken and sprinkle with mozzarella and Parmigiano-Reggiano. Bake about 15 minutes or until cheese is bubbly.

Meanwhile, cook spaghetti in a large pot of boiling salted water according to package directions; drain. Toss spaghetti with reserved tomato-olive sauce. Cut the remaining basil leaves into shreds. Serve chicken with spaghetti. Garnish with shredded basil.