COURT OF CHANCERY

OF THE

STATE OF DELAWARE

TAMIKA R. MONTGOMERY-REEVES

VICE CHANCELLOR

Leonard Williams Justice Center

500 N. King Street, Suite 11400

Wilmington, Delaware 19801-3734

Date Submitted: December 7, 2017

Date Decided: March 29, 2018

Kevin R. Shannon, Esquire

Christopher N. Kelly, Esquire

Andrew H. Sauder, Esquire

Potter Anderson & Corroon LLP

1313 North Market Street

Hercules Plaza, 6th Floor

Wilmington, Delaware 19801

John M. Seaman, Esquire

E. Wade Houston, Esquire

Abrams & Bayliss LLP

20 Montchanin Road, Suite 200

Wilmington, Delaware 19807

RE: Plaze, Inc. & Apollo Aerosol Industries LLC v. Chris K. Callas et al.

Civil Action No. 2017-0432-TMR

Dear Counsel:

This letter opinion addresses Defendants’ Motion to Dismiss under Court of 

Chancery Rule 12(b)(6). For the reasons set forth below, the Motion is DENIED. 

I. Background

All facts are drawn from the Verified Complaint for Injunctive and Other 

Relief (the “Complaint”) and the documents incorporated therein. At this stage of 

the proceedings, I must take all of Plaintiffs’ well-pled facts as true and draw all 

reasonable inferences in their favor. 1

 

 

1

 The Complaint alleges that Defendants shredded a large quantity of documents in 

the month leading up to their departure and had their third-party IT vendor purge 

their company emails before their departure. Compl. ¶¶ 41-42. Plaintiffs explained 
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Plaintiff Plaze, Inc. (“Plaze” or the “Buyer”) is a “full-service specialty 

contract manufacturer of automotive, household, insecticide, and pesticide 

aerosols.”2

 Plaze is the sole member of Plaintiff Apollo Aerosol Industries LLC 

(“Apollo” or the “Company”).3

 In 2015, Plaze acquired Apollo from Defendants (or 

the “Sellers”) for $100,000,000 pursuant to a stock purchase agreement (the 

“SPA”).4

 

The parties signed the SPA on November 24, 2015, and the transaction closed 

on December 15, 2015.5

 The SPA sets out a mechanism for post-closing adjustments 

to the purchase price, as well as a limitation on the Sellers’ post-closing 

indemnification liability. The SPA contains representations and warranties by 

Defendants on behalf of Apollo that are at issue in this litigation.6

 These include 

representations and warranties about the financial records of Apollo, Apollo’s 

 

that the Complaint is based primarily on the company emails they were able to 

recover after the purge. Id. ¶ 42; Oral Arg. Tr. 51-52. 

2

 Compl. ¶ 9. 

3

 Id. ¶ 10. 

4

 Id. ¶ 2. 

5

 Id. ¶ 23. 

6

 Id. ¶¶ 63-66; Id. at Ex. 1, at 20-35. 
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compliance with certain laws and contracts, and Apollo’s product liability exposure. 

Indemnification is the sole remedy for a breach of a representation or warranty under 

the SPA.7

 The SPA also contains several restrictive covenants relevant to this 

litigation, including non-compete, non-solicit, and confidentiality provisions.8

 The 

parties agreed that specific performance, an injunction, or other equitable relief are

necessary to enforce these provisions of the SPA.9

 

After the closing, Defendants Chris Callas10 and Maria Callas continued to 

work at Apollo, but the relationship soured. On March 28, 2016, Apollo and Chris 

Callas entered into a mutual separation and settlement agreement (the “Separation 

Agreement”) effective March 31, 2016.11 The Separation Agreement included a 

severance amount, a repurchase of LLC units, and a settlement of the purchase price 

under the SPA, as well as additional representations, warranties, and restrictive 

covenants applicable to Chris Callas.

 

7

 Id. at Ex. 1, § 6.7. 

8

 Id. ¶¶ 25-33; Id. at Ex. 1, at 53-55. 

9

 Id. at Ex. 1, at 61-62. 

10 At closing, Defendant Chris Callas entered into an employment agreement with 

Plaintiffs to continue working as CEO of Apollo. Id. ¶ 24. 

11 Id. ¶ 35; Id. at Ex. 2. Maria Callas also departed Apollo on March 31, 2016. Id. ¶ 

35. 
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The heart of the Complaint is Plaintiffs’ contention that after the Callases

departed Apollo they started a competing business and attempted to solicit 

employees from Apollo. Plaintiffs also contend that several breaches of 

representations and warranties, for which Defendants owe them indemnification, 

came to light during the survival period. 

On June 7, 2017, Plaintiffs filed the Complaint seeking to enjoin the 

competitive behavior of Defendants and compel payment of the indemnification and 

tax adjustment amounts. Defendants moved to partially dismiss the Complaint on 

July 7, 2017, and the Court heard oral argument on the Partial Motion to Dismiss on 

December 7, 2017. 

II. Analysis

The Complaint contains nine counts, eight of which Defendants move to 

dismiss.12 These eight counts fall into two broad categories: (1) breaches of 

restrictive covenants, for which Plaintiffs seek specific performance or injunctive 

relief, and (2) breaches of representations and warranties, for which Plaintiffs seek 

indemnification. Counts I through IV allege breaches of restrictive covenants. 

Counts V through VIII allege breaches of representations and warranties. In support 

 

12 Defendants have not moved to dismiss Court IX, which alleges a breach of Section 

6.8 of the SPA related to the tax adjustment amount. Id. ¶¶ 132-36. 
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of their motion to dismiss, Defendants first argue that the subsequent Separation 

Agreement between Plaintiffs and Defendant Chris Callas settled all claims in 

Counts V through VIII for breaches of representations and warranties. Second, 

Defendants argue that the allegations in the Complaint fail to state a claim under 

Court of Chancery Rule 12(b)(6) as to Counts I through IV and part of Count VIII. 

I address each argument in turn.

A. Standard of Review

When considering a motion to dismiss for failure to state a claim under Court 

of Chancery Rule 12(b)(6), a court must accept all well-pled factual allegations in 

the complaint as true, accept even vague allegations in the complaint as well-pled if 

they provide the defendant notice of the claim, “draw all reasonable inferences in 

favor of the non-moving party,” and deny the motion unless the plaintiff could not 

recover “under any reasonably conceivable set of circumstances susceptible of 

proof.”13 

All the claims in this case hinge on the Court’s interpretation of the parties’ 

contracts. “Delaware adheres to the ‘objective’ theory of contracts, i.e., a contract’s 

construction should be that which would be understood by an objective, reasonable 

 

13 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002). 
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third party.”14 “When interpreting a contract, this Court ‘will give priority to the 

parties’ intentions as reflected in the four corners of the agreement,’ construing the 

agreement as a whole and giving effect to all its provisions.”15 “In giving sensible 

life to a real-world contract, courts must read the specific provisions of the contract 

in light of the entire contract.”16 

B. The Separation Agreement Does Not Release Any Indemnification 

Claims for the Breaches of the Representations and Warranties 

Alleged in Counts V through VIII as a Matter of Law 

Defendants contend that a provision in the Separation Agreement, when read 

in the context of, and in conjunction with, the SPA, released any indemnification

claims against Defendants arising from the SPA as a matter of law. Defendants point 

to Section 6.3(f) of the SPA and Paragraph 4 of the Separation Agreement to support 

this contention.

Section 6.3 of the SPA governs “Sellers’ Indemnification” and lays out a 

comprehensive indemnification scheme.

17 Section 6.3(f) of the SPA states: “[a]ll 

 

14 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010). 

15 Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting GMG Capital 

Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012)). 

16 Chi. Bridge & Iron Co. N.V. v. Westinghouse Elec. Co., 166 A.3d 912, 913-14 (Del. 

2017). 

17 Id. at Ex. 1, at 41. 
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indemnification payments under this Section 6.3 shall be deemed adjustments to the 

Final Purchase Price.”18 Paragraph 4 of the Separation Agreement states:

Employee, in his capacity as a Seller (as defined in the 

Purchase Agreement) and Representative (as defined in 

the Purchase Agreement), and Plaze hereby agree that the 

Final Purchase Price (as defined in the Purchase 

Agreement) and the related purchase price adjustment 

under Section 2.4 of the Purchase Agreement (“the Final 

Purchase Price Adjustment”) are each set forth on Annex 

C attached hereto and that such Final Purchase Price and 

the Final Purchase Price Adjustment shall be final, 

conclusive, and binding on the parties to the Purchase 

Agreement.19

Defendants argue that Paragraph 4 of the Separation Agreement settled all 

indemnification payments under Section 6.3 because any indemnification payment 

must adjust the Final Purchase Price due to Section 6.3(f) of the SPA. But the Final 

Purchase Price and Final Purchase Price Adjustment in the Separation Agreement 

were “final, conclusive, and binding” on the parties, which would make any 

indemnification adjustment required under Section 6.3(f) impossible. Thus, any 

indemnification claims must have been settled by the Separation Agreement.

 

18 Id. at Ex. 1, at 42. 

19 Id. at Ex. 2, at 2. 
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In response, Plaintiffs first argue that Defendants’ interpretation of Section 

6.3(f) of the SPA is incorrect. Plaintiffs point to the United States Supreme Court 

case Arrowsmith v. Commissioner20 as evidence that Section 6.3(f) merely relates to 

the parties’ intended tax treatment of any indemnification payments. Next, Plaintiffs

argue that it would be absurd to read the Separation Agreement to nullify the

complex eighteen-month indemnification provisions of the SPA in the way

Defendants suggest. Plaintiffs point to the fact that Paragraph 4 of the Separation 

Agreement explicitly mentions Section 2.4 of the SPA, which governs the PostClosing Adjustment to the Final Purchase Price, but the Separation Agreement does 

not mention anything about indemnification or Section 6.3 of the SPA.21 The 

Separation Agreement’s final paragraph states: “For the avoidance of doubt, nothing 

contained in this Agreement shall limit, modify, or otherwise affect any party’s 

obligations under the [SPA] . . . .”22 Thus, Plaintiffs contend nothing in the 

Separation Agreement evidences the intent of the parties to gut the indemnification 

provisions of the SPA. 

 

20 344 U.S. 6 (1952). 

21 Compl. Ex. 2, at 2. 

22 Id. at Ex. 2, at 4. 
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In light of Plaintiffs’ arguments, Defendants, at best, offer another possibly 

reasonable interpretation of the contract. While this may entitle them to discovery 

related to the parties’ intentions, it does not entitle them to dismissal as a matter of 

law at this stage. 

Defendants argue in the alternative that, at the very least, the Separation 

Agreement released Plaintiffs’ claims for breach of the financial statement 

representations and warranties because Section 2.4 includes working capital 

adjustments, and accounts receivable and accounts payable are both part of the 

working capital calculation. I agree with Plaintiffs that this argument “conflates the 

SPA’s post-closing working capital adjustment process—i.e., the process for 

determining a ‘final, conclusive, and binding’ Final Purchase Price as set forth in 

Section 2.4 of the SPA—with the parties’ right to seek indemnification for breach 

of representations, warranties, and covenants under Article VI of the SPA.”23 The 

Motion to Dismiss Counts V through VIII therefore is DENIED.

C. Plaintiffs Have Pled Sufficient Facts to State a Claim for Breach of 

the Non-Compete and Non-Solicit Provisions of the SPA

The Complaint contains well-pled facts that state a reasonably conceivable 

claim that Defendants violated Sections 6.16(b) and 6.16(c) of the SPA, which 

 

23 Pls.’ Opp’n Br. 23. 
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contain the restrictive covenants that prohibit competition and solicitation by 

Defendants post-closing. 

Section 6.16(b) is the restrictive covenant prohibiting post-closing 

competition. It states:

Each Seller covenants that during the period commencing 

on the date hereof and ending on the third anniversary of 

the date hereof (the “Restricted Period”), other than at the 

request or direction of Buyer, such Seller shall not, directly 

or indirectly, invest or own any interest in, manage, 

control, participate in (whether as an operator, consultant, 

director, employee, agent, representative or otherwise), 

consult with, render services for or otherwise engage in 

any business or entity that competes with the Company 

Group’s businesses as conducted or actively planned to be 

conducted on the date hereof within any geographic 

location in which the Company Group operates or actively 

plans to operate on the date hereof (it being understood 

that such geographic area currently comprises the United 

States); provided, however, that nothing in this Section 

6.16(b) shall prevent a Seller from being a passive owner 

of not more than 5% of the outstanding equity securities 

of any publicly traded entity, so long as such Seller has no 

active participation in the business of such entity.24

Section 6.16(c) is the restrictive covenant prohibiting post-closing solicitation 

of Apollo employees. It states:

Each Seller covenants that during the Restricted Period, 

other than at the request or direction of Buyer, such Seller 

shall not, directly or indirectly, (i) (x) induce or attempt to 

 

24 Compl. Ex. 1, at 55. 
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induce any employee or independent contractor of the 

Company or any Subsidiary who is employed or engaged 

by the Buyer Group to leave the employ of the Buyer 

Group, or in any way knowingly interfere adversely with 

the relationship between the Buyer Group and any 

employee thereof or (y) actually hire any employee or 

independent contractor that is or was, at any time within 

six months of such proposed hiring, employed by the 

Buyer Group; (ii) solicit or induce or attempt to solicit or 

induce any customer, supplier, licensor, licensee or lessor 

of the Company or any Subsidiary (each a “Business 

Relation”) to cease or refrain from doing business with, or 

otherwise modify adversely the business done with, the 

Company or the Subsidiaries; or (iii) in any way 

knowingly interfere with the relationship (or prospective 

relationship) between any Business Relation and the 

Buyer Group. It shall not be a violation of Section 

6.16(c)(i)(x) if a Seller makes good faith generalized 

solicitations for employees (not specifically targeted at 

employees of the Company Group) through 

advertisements or search firms.25

Plaintiffs have pled the following facts pertaining to Defendants’ violations 

of the non-compete and the non-solicitation agreements. “[I]n early January 2016, 

Chris Callas, on information and belief, asked another Apollo employee to research 

whether the company names ‘First Brands’ and ‘Best Brands’ were already in use.”26 

“Then, in a series of emails throughout January, February, and March 2016, Chris 

 

25 Id. 

26 Id. ¶ 37. 
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Callas emailed with multiple financial advisors about acquiring new companies 

and/or opening investment credit lines, noting, for example, ‘the truth is I am 

interest[ed] to buy another company.’”27 “In addition, in email correspondence 

throughout February and March 2016, Chris Callas indicated an intention to 

purchase tanks and/or concrete pads for heptane tanks at some point in the future.”28 

Then, days before his departure from Apollo, “[o]n March 16, 2016 . . . [Chris 

Callas] directed an Apollo employee to circulate technical calculations for a heptane 

concrete pad in order ‘to talk the same language[,]’ cautioning ‘send it from your 

cell phone and don’t cc me[.]’”29

“[I]n the summer of 2016, Chris Callas—through non-party and former 

Apollo Vice President Richard Wilkinson (‘Wilkinson’)—bid on used aerosol 

equipment auctioned off by another chemical company.”30 “Shortly thereafter, 

Wilkinson began working for SPL, which . . ., in June 2016, registered as a foreign 

profit corporation in Georgia, with its principal office in Thomaston, Georgia—one 

 

27 Id. ¶ 38 (alteration in original). 

28 Id. ¶ 39 

29 Id. (final two alterations in original). 

30 Id. ¶ 47. 
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mile from the site of a former Apollo manufacturing plant which [Defendants], 

through their holding company (AMC Upson), owned at that time.”31 “On October 

5, 2016, SPL’s webpage began indicating that it had a manufacturing plant in 

Thomaston, Georgia. Shortly thereafter, SPL began leasing equipment for its 

Thomaston plant.”32

“In late February and early March 2017, [Defendants]—through AMC 

Upson—sold the former Apollo manufacturing plant in Thomaston to SPL.”33

Defendants “financed part of SPL’s purchase.”34 “Shortly after that sale, Wilkinson, 

on behalf of his employer, SPL, contacted a major supplier of aerosol propellant 

tanks about purchasing two 10,000-gallon aerosol tanks.”35

Over the “Easter holiday in April 2017, Chris Callas invited SPL’s Chief 

Executive Officer, Zachary Colander (‘Colander’), to his home. Chris Callas also 

invited Wilkinson and two current Apollo employees, as well as another Apollo 

 

31 Id. ¶ 48. 

32 Id. ¶ 49. 

33 Id. ¶ 50. 

34 Id. 

35 Id. ¶ 52. 
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customer, who all attended.”36 “At the Easter dinner, Chris Callas introduced 

Colander to a current Apollo executive as his ‘very dear friend Zach,’ and, when 

discussing SPL’s business with Apollo’s employees, Chris Callas referred to SPL as 

‘we,’ further indicating his involvement with SPL.”37 “At the same dinner, Colander 

told an Apollo employee about SPL’s plans for the Thomaston site, including that 

SPL plans to ‘run’ aerosols and to fill ‘anything our customers want.’”38 “Chris 

Callas [also] told a current Apollo employee to ‘listen to [SPL CEO] Colander,’ and 

that if Colander wants the employee to be his president, then the employee should 

be his president—even going so far as to shout out salary figures in front of the 

employee’s family.”39

All of these allegations taken as true make it reasonably conceivable that (1) 

Defendants, directly or indirectly, invested or owned an interest in, managed, 

controlled, participated in, consulted with, rendered services for or otherwise 

engaged in a business or entity that that was competing with Apollo; and (2) 

 

36 Id. ¶ 53. 

37 Id. ¶ 54. 

38 Id. ¶ 55. 

39 Id. ¶ 57 (final alteration in original). 
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Defendants directly or indirectly attempted to induce an employee of Apollo to leave 

Apollo. Thus, Plaintiffs have stated a claim that Defendants violated Section 6.16(b) 

and (c) of the SPA, and the Motion to Dismiss as to Counts I and II is DENIED.

D. Plaintiffs Have Pled Sufficient Facts to State a Claim Against Chris 

Callas for Breach of the Confidentiality Covenants in the SPA and 

Separation Agreement 

The Complaint contains well-pled facts that state a reasonably conceivable 

claim that Chris Callas breached Section 6.16(a) of the SPA and Paragraph 5 of the 

Separation Agreement. The relevant language of Section 6.16(a) states:

Upon the request of Buyer at any time after the date hereof, 

each Seller shall deliver promptly to Buyer or destroy all 

tangible embodiments (and all copies) of the Confidential 

Information which are in such Seller’s possession or under 

such Seller’s control and provide confirmation thereof in 

writing.40

The relevant language of Paragraph 5 of the Separation Agreement states: 

“Employee represents, warrants, and covenants that: . . . (v) Employee has returned, 

or will prior to the Separation Date, return, to the Company all Confidential 

Information (it being understood that upon execution of this Agreement this 

representation shall constitute Employee’s affirmative confirmation thereof . . . .”41

 

40 Id. at Ex. 1, at 53-54. 

41 Id. at Ex. 2, at 2. 
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Plaintiffs allege that “[o]n the same day Chris Callas signed the Separation 

Agreement, he asked an Apollo employee to send him an investor presentation from 

Apollo’s files that, upon information and belief, contained Apollo’s Confidential 

Information.”42 It is reasonable to infer that Chris Callas has not returned all the 

Confidential Information in his possession, and thus, Plaintiffs have shown that it is 

reasonably conceivable that Defendants violated Section 6.16(a) of the SPA and 

Paragraph 5 of the Separation Agreement. The Motion to Dismiss as to Count III 

against Chris Callas and Count IV is therefore DENIED. 

E. Plaintiffs Have Pled Sufficient Facts to State a Claim Against 

Maria Callas for Breach of the Confidentiality Covenant in the 

SPA

The Complaint contains well-pled facts that state a reasonably conceivable 

claim that Maria Callas breached Section 6.16(a) of the SPA, which contains the 

restrictive covenant regarding confidentiality. The pertinent contract language

states:

Each Seller covenants that, from and after the Closing, 

such Seller shall, and shall cause each of such Seller’s 

Affiliates and representatives to, not disclose, and shall 

treat and hold as strictly confidential, all Confidential 

Information and, except as otherwise expressly permitted 

by this Agreement, refrain from using any Confidential 

Information (other than for the benefit of the Buyer Group 

 

42 Id. ¶ 45. 
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as an employee or consultant thereof after the Closing 

Date).43

Plaintiffs have not pled that Maria Callas disclosed any Confidential 

Information. Plaintiffs have pled, however, that in late March 2016 “Maria Callas 

emailed from her Apollo business email account to a personal email account a host 

of Apollo documents containing, among other items, information related to Apollo’s 

accounts receivable and accounts payable.”44 Plaintiffs also pled that shortly before 

her separation from Apollo, “Maria Callas instructed an Apollo IT manager to send 

her a critical set of documents containing Apollo’s Confidential Information.”45 

Taking these facts as true, and considering them in the context of all the facts 

Plaintiffs have pled, it is, just barely, reasonably conceivable that Maria Callas has 

used this Confidential Information in violation Section 6.16(a) of the SPA. Plaintiffs 

have therefore stated a claim for the breach of this restrictive covenant as to Maria

Callas, and the Motion to Dismiss as to Count III against Maria Callas is DENIED. 

 

43 Id. at Ex. 1, at 53-54. 

44 Id. ¶ 40. 

45 Id. ¶ 43. 
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F. Plaintiffs Have Pled Sufficient Facts to State a Claim Against 

Defendants for Breach of the Legal Compliance Representation 

and Warranty

Defendants only challenge the sufficiency of the allegations related to the 

alleged breaches of representations and warranties in one paragraph of the 

Complaint. The paragraph, however, contains well-pled facts that state a reasonably 

conceivable claim that Defendants breached Section 3.16 of the SPA. Section 3.16 

contains Defendants’ representations and warranties on behalf of Apollo regarding 

Apollo’s compliance with laws. Section 3.16(a) states:

(a) Except as set forth on Schedule 3.16(a), the Company 

Group has complied and is in compliance, in each case, in 

all material respects, with all applicable laws and no 

written notices have been received by and no claims have 

been filed against the Company Group alleging a violation 

of any such laws. Neither the Company nor any Subsidiary 

has received any written notice of any violation or any 

alleged violation of any law. No officer, director, 

employee, independent contractor, consultant, advisor or 

agent of the Company Group has been or is authorized to 

make or receive, and none of the Company Group’s 

officers, directors, managers, employees or, to the 

Knowledge of the Company, consultants, advisors or 

agents have made or received, any bribe, kickback 

payment or other illegal payment at any time with respect 

to the business of the Company Group.46

 

46 Id. at Ex. 1, at 33. 
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Plaintiffs plead that “Chris Callas caused Apollo to enter into a fictitious long 

term lease arrangement with a longtime associate, pursuant to which Apollo paid 

over $300,000 for copiers that were never delivered to Apollo.”47 The Complaint 

further alleges that “Chris Callas profited personally from the sham arrangement by 

receiving all or most of the money Apollo paid for the copiers.”48 Plaintiffs argue 

that this arrangement constituted a “bribe, kickback payment or other illegal 

payment,” in violation of Section 3.16 of the SPA. Because the Court must deny a 

motion to dismiss unless the plaintiff would not be entitled to recover under any 

reasonably conceivable set of circumstances susceptible of proof, the Motion to 

Dismiss as to this claim must be DENIED.

III. Conclusion

For the foregoing reasons the Motion to Dismiss is DENIED. 

IT IS SO ORDERED. 

Sincerely,

 /s/Tamika Montgomery-Reeves

 Vice Chancellor

 

47 Id. ¶ 81. 

48 Id.