Today’s opinion completes a trilogy of decisions by this Court. The ease involves claims by the plaintiff-appellant, Cinerama, Inc. (“Cinerama”), against the directors of Technicolor, Inc. (“Technicolor”) and others. The issues presented relate to the sale of *1160 Technicolor to MaeAndrews & Forbes Group, Inc. (“MAF”) in a two-stage tender offer/merger transaction for $23 per share in cash. Cinerama was at all times the owner of 201,200 shares of the common stock of Technicolor, representing 4.405 percent of the total shares outstanding.
Cinerama did not tender its stock in the first stage of the MAF acquisition, which commenced on November 4,1982. Cinerama dissented from the second stage merger, which was completed on January 24, 1983. After dissenting, Cinerama petitioned the Court of Chancery in March 1983 for an appraisal of its shares pursuant to 8 Del.C. § 262. During pretrial discovery in the appraisal proceedings, certain deposition testimony caused Cinerama to believe that the directors of Technicolor had failed to comply with their fiduciary duties in connection with the sale of the company.
In January 1986, Cinerama filed a personal liability action in the Court of Chancery against Technicolor, seven of the nine members of the Technicolor board of directors at the time of the merger, MAF, Maeanfor and Ronald O. Perelman (“Perelman”). Perelman was MAF’s board chairman and controlling shareholder. Cinerama’s personal liability action alleged fraud, breach of fiduciary duty and unfair dealing. It includеd a claim for rescissory damages and other relief. 3
FIRST APPEAL
The defendants in the personal liability action filed a motion to dismiss on the ground that Cinerama had no standing to pursue such a claim after petitioning for an appraisal of its shares. The Court of Chancery denied the motion, but ruled that after discovery was completed, Cinerama would have to elect which cause of action it intended to pursue.
See Cede & Co. v. Technicolor, Inc.,
Del.Ch., C.A. Nos. 7128, 8358,
In Cede I, this Court held that the Court of Chancery had erred, as a matter of law, in requiring Cinerama to make an election of remedies before trial. We held that Cinerama was entitled to pursue concurrently, through trial, its appraisal action and its personal liability action. This Court then remanded the case to the Court of Chancery for a trial of those consolidated actions. Id. at 1192.
SECOND APPEAL
Following further discovery and an extended trial, the Court of Chancery announced its decision in the appraisal action first. In its “appraisal opinion” dated October 19, 1990, the Court of Chancery found the fair value of the dissenting shareholders’ Technicolor stock to be $21.60 per share as of the date of the merger, January 24, 1983.
Cede & Co. v. Technicolor, Inc.,
Del.Ch., C.A. No. 7129,
In June 1991, the Court of Chancery issued its “personal liability opinion,” in which it found persuasive evidence that the defendant Technicolor directors had breached their fiduciary duties.
Cinerama v. Technicolor, Inc.,
Del.Ch., C.A. No. 8358,
Cinerama appealed from the judgments entered in both the appraisal action and the personal liability action.
Cede & Co. v. Technicolor, Inc.,
Del.Supr.,
THIS APPEAL
On remand, the Court of Chancery concluded that the defendants had met their burden of showing entire fairness, resolved the additional loyalty issues posited by this Court in
Cede II,
and entered judgment for the defendants.
Cinerama, Inc. v. Technicolor, Inc.,
Del.Ch., C.A. No. 8358 (Oct. 6, 1994,
revised
Oct. 12, 1994,
revised
Oct. 18, 1994),
reprinted in
20 Del.J.Corp.L. 277,
This Court has сoncluded the Court of Chancery’s decision that the Technicolor sale was entirely fair to the shareholders and its judgment in favor of the defendants should be affirmed. Consequently, the questions framed by issues (12) and (13) above, and the Court of Chancery’s discussion and determinations regarding damages, are not relevant in this appeal. Accordingly, this Court will neither address nor decide any of the damage issues raised on appeal.
In the following opinion this Court: first, reviews certain general principles relating to the procedural and substantive aspects of the business judgment rule and the substantive entire fairness standard; second, reviews the purpose of the remand in
Cede II
and distinguishes the remand in this case from that in
Smith v. Van Gorkom,
Del.Supr.,
FACTS
The facts of this case are recited at length in this Court’s opinion following the first post-trial appeal.
Cede II,
BUSINESS JUDGMENT REBUTTED EVIDENTIARY BURDEN SHIFTS ENTIRE FAIRNESS STANDARD APPLIES
The business judgment rule “operates as
both
a procedural guide for litigants and a substantive rule of law.”
Cede II,
If a shareholder plaintiff fails to meet this evidentiary burden, the business judgment rule attaches to protect corporate officers and directors and the decisions they make, and our courts will not second-guess these business judgments. See, e.g., [Citron v. Fairchild Camera & Instrument Corp.,569 A.2d at 64 ; Smith v. Van Gorkom,488 A.2d at 872 ]; see also 8 Del.C. § 141(a). If the rule is rebutted, the burden shifts to the defendant directors, the proponents of the challenged transaction, to prove to the trier of fact the “entire fairness” of the transaction to the shareholder plaintiff. Nixon v. Blackwell, Del.Supr.,626 A.2d 1366 , 1376 (1993); [Mills Acquisition Co. v. Macmillan, Inc., Del.Supr.,559 A.2d 1261 (1989)]; Weinberger v. UOP, Inc., Del.Supr.,457 A.2d 701 , 710 (1983).
Cede II,
Burden shifting does not create
per se
liability on the part of the directors.
Id.
at 371. Rather, it “is a procedure by which Delaware courts of equity determine under what standard of review director liability is to be judged.”
Id.
In remanding this case for review under the entire fairness standard, this Court expressly acknowledged that its holding in
Cede II
did
not
establish liability.
Id.; accord Nixon v. Blackwell,
Del.Supr.,
Where, as in this case, the presumption of the business judgment rule has been rebutted, the board of directors’ action is examined under the entire fairness standard.
Unitrin, Inc. v. American Gen. Corp.,
The concept of fairness has two basic aspects: fair dealing and fair price. The former embraces questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. The latter aspect of fairnеss relates to the economic and financial considerations of the proposed merger, including all relevant factors: assets, market value, earnings, future prospects, and any other elements that affect the intrinsic or inherent value of a company’s stock_ How *1163 ever, the test for fairness is not a bifurcated one as between fair dealing and price, All aspects of the issue must be examined as a whole since the question is one of entire fairness.
Weinberger v. UOP, Inc.,
Because the decision that the
procedural
presumption of the business judgment rule has been rebutted does not establish
substantive
liability under the entire fairness standard, such a ruling does not necessarily present an insurmountable obstacle for a board of directors to overcome. Thus, an initial judicial determination that a given breach of a board’s fiduciary duties has rebutted the presumption of the business judgment rule does not preclude a subsequent judicial determination that the board action was entirely fair, and is, therefore, not outcome-determinative
per se.
8
Id.
at 371;
accord Nixon v. Blackwell,
Although the
procedural
decision to shift the evidentiary burden to the board of directors to show entire fairness does not create liability
per se,
the aspect of fair dealing to which
Weinberger
devoted the most
attention
— disclosure—has a unique position in a
substantive
entire fairness analysis.
See, e.g., In re Tri-Star Pictures, Inc. Litig.,
Del.Supr.,
PURPOSE OF REMAND
Several of the contentions Cinerama raises in this appeal relate to the manner in which the Court of Chancery proceeded upon remand. According to Cinerama, the Court of Chancery disregarded this Court’s mandate and the law of the case. Therefore, it is appropriate to begin this opinion by setting forth why this matter was remanded to the Court of Chancery and what further action was contemplated by this Court.
In
Cede II,
this Court reiterated that a shareholder plaintiff challenging a board de-
*1164
cisión has the initial burden of rebutting the presumption of the business judgment rule.
Cede II,
In Cede II, this Court held that “the record evidence establishes that Cinerama met its burden of proof for overcoming the [business judgment] rule’s presumption of board duty of care in approving the sale of [Technicolor] to MAE.” Id. at 367. 13 This Court then specifically stated that, as a rule of evidence, “[b]urden shifting does not create per se liability on the part of the directors_” Id. at 371. Accordingly, this Court remanded the case to the Court of Chancery “with directions to apply the entire fairness standard of review to the challenged transaction.” Id.
With regard to the duty of loyalty, this Court stated that the following issues would require resolution on remand:
(1) the precise standard of proof required under the second part of the materiality standard ...; (2) the legitimacy of such a standard under Delaware law and the relevance of section 144(a); (3) the effect of the unanimity requirement in Technicolor’s charter on the duty of loyalty standard controlling this case; and (4) the consequence of an affirmance of the decision below finding no breach of the duty of disclosure on the question of director self-interest.
Id. at 366.
In this appeal, Cinerama argues that “under established principles of Delaware law, because a majority of the board bears the taint of self-interest or lack of independence, the director defendants lost the business judgment rule presumption of loyalty so that they were obligated to establish the entire fairness of the transaction even if they had not breached their duty of care.” That specific argument is, of course, academic because this Court did hold that the Technicol- or board of directors had lost that presumptive protection of the business judgment rule by breaching its duty of care and was, therefore, already required to demonstrate the entire fairness of the transaction. Id. at 361. From a procedural perspective, the breach of any one of the board’s fiduciary duties is enough to shift the burden of proof to the board to demonstrate entire fairness. Id.
Why were the loyalty issues remanded if their procedural relevance had become moot as a consequence of this Court’s holding that the business judgment rule’s presumption had been rebutted by a violation of the duty of care? In a given case, the Court of Chancery can, but is not required to, find that independent and adequate alternative breaches of fiduciary duty have rebutted the presumptive protection of the business judgment rule and, thus, mandate an entire fairness analysis. Nevertheless, or irrespective of the particular breach or breaches of fiduciary duty that constituted the basis for shifting the procedural burden of proof to the board, each of the fiduciary duties retains independent substantive significance in an entire fairness analysis. 14
Evidence regarding the manner in which the board otherwise discharged all three of its primary fiduciary duties has probative substantive significance throughout an entire fairness analysis, 15 and by necessity must *1165 permeate the analysis, for two reasons. First, since the evidence that defeated the procedural presumption of the business judgment rule does not establish liability per se, a substantive finding of entire fairness is only possible after examining and balancing the nature of the duty or duties the board breached vis-a-vis the manner in which the board properly discharged its other fiduciary duties. Second, the determination that a board has failed to demonstrate entire fairness will be the basis for a finding of substantive liability. The Court of Chancery must identify the breach or breaches of fiduciary duty upon which that liability will be predicated in the ratio decidendi of its dеtermination that entire fairness has not been established. 16
Accordingly, this Court remanded the issues of loyalty to the Court of Chancery, even though the found breach of the duty of care had already procedurally mandated an entire fairness examination.
See Cede II,
VAN GORKOM REMAND DISTINGUISHED
This Court’s instructions on remand in
Cede II
were not identical to those in
Smith v. Van Gorkom,
Del.Supr.,
In
Van Gorkom,
this Court concluded that the board of directors’ failure to inform itself before recommending a merger to the stockholders constituted a brеach of the fiduciary duty of care and rebutted the presumptive protection of the business judgment rule.
Smith v. Van Gorkom,
Whereas in
Van Gorkom
liability was decided
before
remand, in this case, a condition precedent to a finding of liability was an adverse determination regarding entire fairness
after
remand. This explains this Court’s discussion in
Cede II
of
Barnes v. Andrews,
To inject a requirement of proof of injury into the [business judgment] rule’s formulation for burden shifting purposes is to lose sight of the underlying purpose of the rule. Burden shifting does not create per se liability on the part of the directors; rather, it is a procedure by which Delaware courts of equity determine under what standard of review director liability is to be judged. To require proof of injury as a component of the proof necessary to rebut the business judgment presumption would be to convert the burden shifting process from a threshold determination of the appropriate standard of review to a dispositive adjudication on the merits.
Id. at 371.
Consequently, in Cede II this Court held that injury or damages becomes a proper focus only after a transaction is determined not to be entirely fair. Id. At that point, the measure of damages for any breach of fiduciary duty, under an entire fairness standard of review, is “not necessarily limited to the difference between the price offered and the ‘true’ value as determined under the appraisal proceedings. Under Weinberger, the [Court of Chancery] ‘may fashiоn any form of equitable and monetary relief as may be appropriate, including rescissory damages.’ ” Id. (emphasis added) (citation omitted). Thus, this Court concluded that “the tort principles of Barnes have no place in a business judgment rule standard of review analysis.” Id. at 370. 19
*1167 DUTY OF LOYALTY ISSUES ON REMAND
The Court of Chancery assiduously followed this Court’s mandate to address specific matters regarding the independence and disinterest of Technicolor’s board of directors. The Court of Chancery described its task as follows:
I now turn to an attempt to follow the Supreme Court’s directions with respect to the Technicolor board’s independence and disinterest.... First, I revisit the issue of what standard should be applied to determine whether an individual director is interested in a transaction. Next, I address the test determining whether the board as a whole has been tainted by the existence of one or more interested directors. Finally, I consider the effect, if any, the Technicolor’s charter provision requiring directorial unanimity has upon the duty of loyalty.
Cinerama,
Materiality Standard and Legitimacy
This Court asked the Court of Chancery to resolve two issues relating to the “second part”
20
of the director interest materiality test: (1) the precise standard of proof required; and (2) the legitimacy of such a standard under Delaware law and the relevance of Section 144(a).
Cede II,
The Court of Chancery reasoned that the logical alternative was a subjective “actual person” standard. We agree. The subjective standard is consistent with this Court’s observation, in Cede II, that requiring a shareholder plaintiff to show “the materiality of a director’s self-interest to the given director’s independence” was a “restatement of established Delaware law.” Id. at 363 (emphasis added).
The Court of Chancery stated that “[u]n-der such a test of materiality [it] would be required to determine
not
how or whether a reasonable person in the same or similar circumstances ... would be affected by a financial interest of the same sort as present in the ease, but whether
this
director in fact was or would likely be affected.”
Cinerama,
Cinerama contended on remand, and continues to contend in this appeal, that five of Technicolor’s nine directors were “disabled” by conflicts of interest. The Court of Chancery, however, found every director, except Sullivan, to be free of any material conflict:
I have already stated my conclusion that with the exception of Mr. Sullivan, and potentially Mr. Ryan, none of the other Technicolor directors labored under a conflict of interest which would have been material to a reasonable person. On this remand I further conclude here that there is no persuasive evidence that any of the directors were, in fact, materially influenced in their negotiations by any self-interest they may have had.
Id. at 1150.
The Court of Chanceiy concluded that, “with respect to each of the corporate directors treated in this court’s opinion; analy *1168 sis of actual interference with the directors’ good faith judgment seeking the shareholders’ best benefit does not produce a different result than does the ‘reasonable person’ analysis.” Id. at 1152 (emphasis added). Thus, after applying the enhanced scrutiny required by the subjective “actual person” standard, the Court of Chancery reached the same determinations regarding the materiality of the alleged individual director self-interests as it had previously by applying the objective “reasonable person” standard. 22 Id Those conclusions, as to each director, are supported by the record.
The Court of Chancery then addressed the remanded issue of board independence. The Court of Chancery framed the issue as follows:
Has the presence of the found material self-interest of one or more directors on the board that acted upon a transaction so infеcted or affected the deliberative process of the board as to disarm the board of its presumption of regularity and respect and cast upon the directors the burden (and the heightened risks ...) of the entire fairness form of judicial review.
Id.
at 1153;
see In re Tri-Star Pictures, Inc. Litig.,
Del.Supr.,
The Court of Chancery concluded that a material interest of “one or more directors less than a majority of those voting” would rebut the application of the business judgment rule if the plaintiff proved that “the interested director
controls
or
dominates
the board as a whole or [that] the interested director
failfed] to disclose his interest
in the transaction to the board
and
a reasonable board member would have regarded the existence of the material interest as a significant fact in the evaluation of the proposed transaction.”
Cinerama,
The Court of Chancery then framed and answered the loyalty issues with respect to the procedural question of whether the evidentiary presumption of the business judgment rule had been rebutted and, therefore, the entire fairness standard applied. In this case, that particular question was moot because this Court had already held in Cede II that the entire fairness standard applied to the Technicolor sale. The Court of Chancery’s findings concerning loyalty, however, have probative value within the substantive entire fairness analysis. The Court of Chancery’s materiality formulation, as well as its application, are consistent with Delaware’s procedural and substantive law.
Technicolor Board Loyal
The Court of Chancery found as an ultimate fact regarding the issues of loyalty that “a large majority of the board of Technicolor was disinterested and independent with respect to this transaction and neither of those two directors found [Sullivan] or assumed [Ryan] to be interested, dominated or manipulated the process of board consider-
*1169
ation.
See Paramount Communications, Inc. v. QVC Network, Inc.,
Del.Supr.,
Section 144(a)’s Relevance
In accordance with this Court’s mandate, the Court of Chancery then considered the relevance of 8
Del.C.
§ 144(a) to this case. The concern Section 144 addresses is self-dealing; for example, when a director deals directly with the corporation, or has a stake in or is an officer or director of a firm that deals with the corporation.
See 8 Del.C.
§ 144(a);
see also Cheff v. Mathes,
Del.Supr.,
The Court of Chancery properly began its consideration of Section 144 with the following comment:
[Section 144] does not deal with the question of when will a financial interest of one or more directors cast on the board the burdens and risks of the entire fairness form of judicial review. Rather it deals with the related problem of the conditions under which a corporate contract can be rendered “un-voidable” solely by reason of a director interest. These two problems— when will a director interest replace the business judgment form of review with the entire fairness form of review and when are interested contracts not necessarily voidable — are related in that both focus upon an affect of action by an “independent” corporate decision maker. But as construed by our Supreme Court recently compliance with the terms of Section 144 does not restore to the board the presumption of the business judgment rule; it simply shifts the burden to plaintiff to prove unfairness. See Kahn v. Lynch Communication Systems, Del.Supr.,638 A.2d 1110 (1994).
The inquiry whether a board is independent and disinterested, etc. for purposes of determining whether it qualified for the business judgment rule presumption is somewhat similar to this Section 144 analysis but can’t be the same, since the business judgement form of review analysis inquiry must admit of the possibility that, if there is no material interference with the independence of the board’s process, that business judgment review is possible.
Cinerama,
In this appeal, Cinerama acknowledges that Section 144 is not directly applicable to this case. 24 Nevertheless, according to Cinerama, by analogy the safe harbor provisions in Section 144(a) for disclosed financial inter *1170 ests would not apply in this case because, allegedly, “many of the material conflicts were not disclosed.”
When a boаrd of directors’ loyalty is questioned, Delaware courts determine whether a conflict has deprived stockholders of a “neutral decision-making body.”
Oberly v. Kirby,
Del.Supr.,
The fact that some interested transactions are permitted under our corporate law demonstrates that they are not inherently detrimental to a corporation. As long as a given transaction is fair to the corporation, and no confidential relationship betrayed, it may not matter that certain corporate officers will profit as the result of it.... The key to upholding an interested transaction is the approval of some neutral decision-making body. Under 8 Del.C. § 144, a transaction will be sheltered from shareholder challenge if approved by either a committee of independent directors, the shareholders, or the courts.
Id. In Oberly, even though Section 144(a) did not apply to the action being contested, this Court relied upon the provisions in that statute to illustrate the general principle that, as to the duty of loyalty, approval of a transaction by a board of which a majority of directors is disinterested and independent “bring[s] it within the scope of the business judgment rule.” Id. at 466.
Similarly, notwithstanding Section 144(a)’s inapplicability to this ease, the Court of Chancery concluded that its “materiality” approach to individual director interest and board independence “is highly consistent with” the policy of Section 144. The Court of Chancery then concluded that “the interest of Mr. Sullivan was disclosed and a majority of the non-interested directors approved the transaction in good faith.”
Cinerama,
Unanimity Requirement Technicolor Charter Satisfied
The Court of Chancery next addressed the effect of the unanimity requirement in Technicolor’s charter on the duty of loyalty standard controlling this case. In
Cede II,
this Court found a “further significant issue that neither the parties nor the court below ha[d] addressed; that is, the relevance of Technicolor’s charter requirement of director unanimity to the consequence of a finding of director self-interest.”
Cede II,
If unanimity is required, will one director’s self-interest or lack of independence violate the requirement? Do the provisions of Section 144 override a charter requirement of unanimity? Does full disclosure of a director’s interest to an otherwise disinterested board satisfy Technicolor’s unanimity requirement?
Id. at 366 (footnotes omitted). After answering the first question in the negative, the Court of Chancery found the remaining questions to be moot.
Cinerama argues that the Technicolor merger is voidable because allegedly interested directors participated in the unanimous vote to recommend the repeal of Technicol- or’s supermajority provision. The Technicol- or certificate of incorporation included a su-permajority provision that required a ninety-five percent stoсkholder vote to approve a merger with any entity holding twenty per *1171 cent or more of Technicolor’s stock on the record date for the merger vote. The certificate further provided that the supermajority provision could not be repealed or amended by a less-than-ninety-five percent stockholder vote unless the “Continuing Directors,” by a unanimous vote, recommended the repeal or amendment to the stockholders.
The language governing the repeal of that supermajority vote provision reads as follows:
No amendment to the Restated Certificate of Incorporation of the Corporation shall amend, alter, change or repeal any of the provisions of this Article Tenth, unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote of the holders of at least ninety-five percent (95%) of the outstanding shares of capital stock of the Corporation entitled to vote in elections of directors, considered for the purposes of this Article Tenth as one class; provided that this paragraph 5 shall not apply to, and such ninety-five percent (95%) vote or consent shall not be required for, any amendment, alteration, change or repeal unanimously recommended to the stockholders by the Board of Directors of the Corporation if all of such directors are persons who would be eligible to serve as “Continuing Directors” within the meаning of paragraph (3) of this Article Tenth.
The Court of Chancery observed that the Technicolor charter’s only express criterion for the qualification of directors to participate in the required unanimous board action was that they be persons who would be eligible to serve as “Continuing Directors.” Paragraph 3 of Article Tenth defined the term “Continuing Directors” as follows:
The term “Continuing Director” shall mean a person who was a member of the Board of Directors of the Corporation elected by the stockholders prior to the time that [the merger partner] acquired in excess of ten percent (10%) of the stock of the Corporation entitled to vote in the election of directors, or a person recommended to succeed a Continuing Director by a majority of Continuing Directors then serving on the Board of Directors.
The Court of Chancery concluded that the unanimity provision in the Technicolor charter should not be construed to include an implied exclusion of interested directors from eligibility to participate in the unanimous vote. In reaching that conclusion, it relied upon this Court’s decision in
Berlin v. Emerald Partners,
Del.Supr.,
Plainly a literal interpretation of the unanimity requirement shows that it was satisfied in this instance. No director voting at the October 1981 meeting had been elected after MAF “acquired in excess of ten percent (10%) of the stock of the Corporation.” Provisions in a corporate charter should receive a literal and technical interpretation in most instances. They are customarily drafted by experts who count on them being respected in a precise and literal way. The issue to which the Supreme Court directs our attention — whether one who meets the technical requirement of a continuing director should nevertheless be regarded as a “non-continuing director” because he has a (disclosed) conflicting interest in the transaction, is fully answered I believe by the requirement that, absent fraud or mutual mistake, courts respect and enforce the literal language of the constitutional documents of a corporation.
Cinerama,
The proper resolutions of the other two questions this Court raised regarding the Technicolor charter have been suggested in this opinion already. The second question, whether the provisions of Section 144 override the Technicolor charter requirement of unanimity, has been answered by the conclusion on remand that the unanimous director vote complied with the Technicolor charter. As to the third question, having approved the Court of Chancery’s materiality formulation on remand, this Court concludes that full *1172 disclosure of a director’s self-interest to an otherwise disinterested and independent board would also satisfy the Technicolor charter’s unanimity requirement, i.e., a unanimous vote of the qualified “disinterested and independent” directors. In this case, Sullivan’s interest, the only one found to exist, was disclosed to such a board of directors. Compare 8 Del.C. § 144(a)(1).
ENTIRE FAIRNESS STANDARD APPLICATION ON REMAND
This Court will now review the entire fairness analysis by the Court of Chancery on remand. The Court of Chancery applied the unified approach to entire fairness mandated by established Delaware law.
Kahn v. Lynch Communication Systems, Inc.,
Del.Supr.,
Part One — Fair Dealing Analysis Timing of Transaction
The fair dealing aspect of entire fairness embraces the question “of when the transaction was timed.”
Weinberger v. UOP, Inc.,
Initiation of Transaction
The fair dealing aspect of entire fairness also “embraces questions of ... how [the transaction] was initiated.”
Weinberger v. UOP, Inc.,
Negotiation of Transaction
This Court has held that arm’s-length negotiation provides “strong evidence that the transaction meets the test of fairness.”
Weinberger v. UOP. Inc.,
The Court of Chancery focused on “the evidence ... relating to the course of negotiations.” It noted that the Technicolor negotiators had effectively bargained with MAF to raise its offer price from an initial $15 per share to $23 per share. Furthermore, the Court of Chancery found that:
[W]hile the board’s failure to adequately canvass the market may arguably be consistent with the idea that they were committed, out of self-interest, to the transaction with Perelman, I do not make this inference. First of all it makes no economic sense given the stockholdings of Mr. Kamerman and Bjorkman. Moreover, the board made this decision on the advice of experienced corporate counsel. They thought they had negotiated a good transaction for the shareholders, and did not want to take steps which might jeopardize it. No improper motive, insofar as the evidence suggests, underlay this decision. In my opinion, the record strongly supports a finding that the directors were motivated by the best interests of the *1173 shareholders in negotiating the transaction with MAF.
Cinerama,
The “board approval” aspect of the Court of Chancery’s entire fairness analysis, discussed hereafter, also took into consideration that the MAF transaction was not one that involved a board of directors that was dominated by a majority with a financial interest in the transaction, nor a majority with interests in conflict with the corporation’s shareholders, nor dominated nor manipulated by a person with such interests.
26
The independence of the bargaining parties is a well-recognized touchstone of fair dealing.
See Kahn v. Lynch Communication Systems, Inc.,
Del.Supr.,
Structure of Transaction
The Court of Chancery carefully examined the structure of the transaction. Cinerama argues that the MAF transaction was unfairly structured because it “unquestionably ‘inhibited ... alternative bids’.” It contends that the transaction was locked up, included a no-shop provision, and gave Technicolor no “out,” i.e., no right to terminate. Cinerama’s contention that the merger agreement left Technicolor with “no out” is contradicted by the testimony of Technicol- or’s special legal counsel:
As negotiated out, either the purchaser or Technicolor could terminate if [the merger] hadn’t happened by March 31, 1983. And the effect of that was that if MacAndrews wasn’t able to complete the acquisition for whatever reason, either its own inability or because a better offer had come along so no shareholders tendered into the MacAn-drews offer, then all restrictions on Technicolor would be off if Technicolor terminated the merger agreement because MacAndrews didn’t complete it by March 31, 1983.
Technicolor’s negotiation of these structural concessions demonstrates that the directors did not seek to foreclose competing bids. Cinerama’s assertion that the merger agreement included a “no-shop” clause that “inhibit[ed] [the] board’s ‘ability to negotiate with other potential bidders’” is not supported by the record. Although it is true that Technicolor could not “shop” for competing bids, it successfully preserved its right to provide information to, and engage in discussions with, competing bidders. 27
The Court of Chancery concluded on remand that the MAF transaction was not “locked up” by any device except its very high price.
[W]hile I did conclude that the deal was “probably locked up,” if the value of the company at that time was or appeared to be remotely close to the value Cinerama claimed at trial, any “lock-up” arrangement present would not have created an insupеrable financial or legal obstacle to an alternative buyer. Indeed the conclusion that the transaction was probably locked *1174 up was logically and actually premised upon the belief that the $23 price was high.
Cinerama,
Disclosure to Directors
Cinerama contends that the non-disclosure to the
directors
of the Sullivan fee’s origination at Bear Stearns (MAP’s investment banker) and Sullivan’s meetings with Perelman constituted a breach of fiduciary duty. When it considered the non-disclosure of those same two matters to the shareholders, the Court of Chancery found: first, that the original source of Sullivan’s fee was immaterial under the standard this Court articulated in
Rosenblatt v. Getty Oil Co.,
Del.Supr.,
On remand, the Court of Chancery concluded that if those facts did not require disclosure to the stockholders under
Rosenblatt,
they should not be deemed material under an analogy to Section 144(a)(1) either. The Court of Chancery reiterated that the
material
facts regarding Sullivan’s interest (the fee’s existence and cоntingency on the MAF deal) were “disclosed and a majority of the non-interested directors approved the transaction in good faith.”
Cinerama,
With respect to Ryan’s assumed interest, which was not disclosed, the Court of Chancery held that “it is clear under the language of the statute, that the alleged hope of better employment opportunities does not constitute the kind of interest covered by Section 144.”
Cinerama,
Approval By Directors
The Court of Chancery properly took into consideration its previous factual finding that “the predominant majority of the board was, in approving the MAF proposal, motivated in good faith to achieve a transaction that was the best available transaction for the benefit of the Technicolor shareholders.”
Cinerama,
The Court of Chancery acknowledged that the Technicolor board relied heavily upon the advice of Kamerman, the CEO. The Court of Chancery also recognized that the directors “may not blindly rely upon a strong CEO without risk.”
Cinerama,
*1175 In addition, the Court of Chancery found “the Technicolor board’s reliance upon experienced counsel to evidence good faith and the overall fairness of the process.” Id. at 1142.
[T]he directors were placed in a position at the October 29 board meeting in which highly competent, indeed, expert legal counsel advised them that they could exercise a good faith business judgment. The testimony of that attorney is clear and I accepted his honesty as a witness completely.
Id. at 1141. The Court of Chancery ultimately found the fact that “[t]he directors were acting, and their advisors were guiding them, according to the duties known to them in 1982” was a “relevant but not dominant consideration” in determining fairness. Id. at 1141. We agree that the Court of Chancery could properly consider the Technicolor directors’ reliance on special legal counsel as a factor supporting fair dealing in an entire fairness analysis. 29
According to the Court of Chancery, it also weighed “the process of board consideration and approval ...” in determining entire fairness. The degree of procedural due care a board of directors exercises has been recognized as a continuing component of an entire fairness analysis.
See Rosenblatt v. Getty Oil Co.,
The Court of Chancery properly considered that the Technicolor board’s now undisputed lack of care in making a market cheek was a flaw in its approval process.
30
However, the Court of Chancery also considered that the Technicolor board: had carefully focused on whether the MAF bid offered the best price available in a sale of the company; had considered whether to shop the company and the risks that course would entail; possessed a substantial amount of prior knowledge pertinent to the decision to sell; and relied on the reports of Kamerman, Goldman Sachs and its outside legal counsel. Under these circumstances, in light of the board’s good faith and the arm’s-length negotiations, the Court of Chancery determined the decision to approve the MAE proposal without making a market check, while clearly deficient, did not preclude a finding of entire fairness.
Cinerama,
In its initial personal liability decision, the Court of Chancery found, after trial, that the majority of Technicolor directors were motivated in the transaction, appropriately, to promote the best interests of the shareholders. On remand, the Court of Chancery agаin concluded “that neither the board nor its deliberations were dominated or manipulated by a person with a material conflicting interest or otherwise lacked independence.”
*1176
Cinerama,
Disclosure to Shareholders
Another well-recognized aspect of fair dealing is the board of directors’ duty of disclosure to the shareholders.
Weinberger v. UOP, Inc.,
The variation was that this Court, while affirming the ruling that Ryan’s undisclosed and “assumed” interest was not material for disclosure purposes pursuant to the holding in
Rosenblatt,
directed the Court of Chancery to consider Ryan’s assumed interest “in the context of Technicolor’s charter requirement of director unanimity.”
Id.
As to that limited disclosure issue, the Court of Chancery held on remand that the unanimity requirement in Technicolor’s charter was unaffected by director interest in the absence of “fraud or mutual mistake.”
Cinerama,
The Court of Chancery’s conclusion that the directors had complied with the disclosure duty is not, in and of itself, determinative of entire fairness, but it does have persuasive
substantive
significance.
See Rabkin v. Philip A. Hunt Chem. Corp.,
Del.Supr.,
Approval by Shareholders
The record reflects that “more than seventy-five percent of [Technicolor’s] shares were tendered in the transaction” to MAF. Cinerama was the
only
stockholder to pursue appraisal rights. Generally, “where a majority of fully informed stockholders ratify action of even interested directors, an attack on the ratified transaction normally must fail.”
See Smith v. Van Gorkom, Del
.Supr.,
Part Two — Fair Price Analysis
In addition to fair dealing, the other major component of the non-bifureated entire fairness standard is fair price. The Court of Chancery found “[n]umerous reliable sources [that] indicate that the $23 per share received constituted the highest value reasonably available to the Technicolor shareholders.”
Cinerama,
Cinerama argues that if Technicolor had been “shopped,” a “cash-rich” purchaser would have come forward and offered a higher price. The Court of Chancery concluded, however, that Cinerama had offered no credible evidence to support that proposition
in rebuttal
to Technicolor’s “fair price” evidence.
Accord Rosenblatt v. Getty Oil Co.,
Del.Supr.,
This Court has observed that “when it is widely known that some change in control is in the offing and no rival bidders are forthcoming over an extended period of time, that fact is supportive of the board’s decision to proceed.”
Barkan v. Amsted Indus., Inc.,
Del.Supr.,
The Court of Chancery concluded that the $23 per share offer “was the highest value reasonably achievable.”
Cinerama,
Part Three — Entire Fairness Determination
Over the course of forty-seven days, the Court of Chancery heard more than forty-one days of live testimony, including twenty- *1178 six days of expert testimony. 33 It was ultimately called upon to assess the demeanor and credibility of twenty-two witnesses, four of whom were director defendants. According to the Court of Chancery, its entire fairness determination was based, in part, on its conclusions that:
(1) CEO Kamerman consistently sought the highest price that Perelman would pay; (2) Kamerman was better informed about the strengths and weaknesses of Technicolor as a business than anyone else; he was an active and experienced CEO who had designed and implemented a cost reduction program that was very beneficial and knew the businesses in which Technicolor operated; (3) Kamerman and later the board were advised by films who were among the best in the country; (4) the negotiations lead to a price that was very high when compared to the prior market price of the stock (about a 100% premium over unaffected market price) or when compared to premiums paid in more or less comparable transactions during the period; (5) while the company was not shopped, there is no indication in the record that more money was possible from Mr. Perelman or likely from anyone else; management declined to do an MBO transaction at a higher price and while I did conclude that the deal was “probably locked up,” if the value of the company at that time was or appeared to be remotely close to the value Cinerama claimed at trial, any “lock-up” arrangement present would not have created an insuperable financial or legal obstacle to an alternative buyer. Indeed the conclusion that the transaction was probably locked up was logically and actually premised upon the belief that the $23 price was high.
Cinerama,
I, of course, desire to accord complete respect to the Supreme Court’s conclusion that the director defendants were negligent and insufficiently informed when they resolved to accept the MAF proposal. And I recognize the force of the claim that a process that is uninformed can never be fair to shareholders. Yet recognizing that a single judgment concerning all factors is called for I find myself unable to conclude that the MAF tender offer/merger was not a completely fair transaction.
Id. at 1140 (emphasis added).
[W]hile I conclude that the process followed by the board in authorizing the corporation to enter into the MAF transaction was flawed in that, as found by the Supreme Court, the board was insufficiently informed to make a judgment worthy of [procedural] presumptive deference, nevertheless considering the whole course of events, including the process that was followed, the price that was achieved and the honest motivation of the board to achieve the most financially beneficial transaction available, I conclude that the defendants have introduced sufficient evidence to support a conclusion that, and I do conclude that, the merger in which plaintiff was cashed out, as well as the tender offer in which MAF acquired the stock interest that enabled MAF to cash out plaintiff were [substantively entirely] fair transactions in all respects to Cinerama.
Id. at 1143-44.
STANDARD OF REVIEW ENTIRE FAIRNESS DETERMINATION
The standard and scope of appellate review of the Court of Chancery’s factual findings following a post-trial application of the entire fairness standard to a challenged merger is governed by
Levitt v. Bouvier,
Del.Supr.,
In exercising our power of review, we have the duty to review the sufficiency of the evidence and to test the propriety of the findings helow. We do not, however, ignore the findings made by the trial judge. If they are sufficiently supported by the record and are the product of an orderly and logical deductive process, in the exercise of judicial restraint we accept them, even though independently we might have reached opposite conclusions. It is only when the findings below are clearly wrong and the doing of justice requires their overturn that we are free to make contradictory findings of fact. When the determination of facts turns on a question of credibility and the acceptance or rejection of “live” testimony by the trial judge, his findings will be approved upon review. If there is sufficient evidence to support the findings of the trial judge, this Court, in the exercise of judicial restraint, must affirm.
Levitt v. Bouvier,
Accordingly, this Court will not ignore the findings of the Court of Chancery if they are sufficiently supported by the record and are the product of an orderly and logical deductive process.
Id.
In addition, this Court accords “a high level of deference” to Court of Chancery findings based on the evaluation of expert financial testimony.
Kahn v. Household Acquisition Corp.,
Del.Supr.,
THIS APPEAL ENTIRE FAIRNESS AFFIRMED PRINCIPLED BALANCING ANALYSIS
In
Cede II,
this Court emphasized that the entire fairness standard is exacting and requires the board of directors to “establish to the
court’s
satisfaction that the transaction was the product of both fair dealing
and
fair price.”
Cede II,
A finding of perfection is not a
sine qua non
in an entire fairness analysis. That is because the entire fairness standard is not even applied unless the presumption of the business judgment rule has been rebutted by evidence that the “directors ... breached any
one
of the
triads
of their fiduciary duty — good faith, loyalty, or due care.”
Cede II,
The standard of entire fairness is also not in the nature of a litmus test that “lend[s] itself to bright line precision or rigid doctrine.”
Nixon v. Blackwell,
Del.Supr.,
The record reflects that the Court of Chancery applied a “disciplined balancing test,” taking into account all relevant factors.
See Nixon v. Blackwell,
*1180
That entire fairness determination, incorporating questions of credibility and based on more than forty-one days of live testimony and extensive expert witness presentations, must be accorded substantial deference on appellate review.
Rosenblatt v. Getty Oil Co.,
CONCLUSION
On remand, the Court of Chancery properly addressed each of the issues identified by this Court in its mandate. The judgment of the Court of Chancery, in favor of the defendants, is AFFIRMED. 34
Notes
.Cinerama also contended that the merger was void
ab initio
because it violated a supermajority provision in Technicolor’s charter that required either unanimous director approval or a ninety-five percent vote of the shareholders. In
Cede & Co. v. Technicolor, Inc.,
Del.Supr.,
. This opinion is reprinted in 13 Del.J.Corp.L. 225 (1988).
. This opinion is reprinted in 17 Del.J.Corp.L. 551 (1992).
. The Court of Chancery also found no merit in Cinerama’s further claims: that the merger was void
ab initio;
that the Technicolor board of directors had breached its duty of disclosure in its 14D-9 filing and proxy statement; and that MAF and Perelman, on becoming controlling
*1161
shareholders of Technicolor, had breached fiduciary duties owed to Cinerama. This Court affirmed those rulings in
Cede II,
. The parties did brief and argue their respective positions regarding the issues that this Court had remanded to the Court of Chancery.
. Nevertheless, this Court has noted that "[b]e-cause the effect of the proper invocation of the business judgment rule is so powerful and the standard of entire fairness so exacting, the determination of the appropriate standard of judicial review frequently is determinative of the outcome of [the] litigation.”
Mills Acquisition Co. v. Macmillan, Inc.,
Del.Supr.,
. This Court has recently held that a violation of the duty of disclosure is not necessarily a breach of the duty of loyalty.
Arnold v. Society for Savings Bancorp, Inc.,
Del.Supr,
. This Court has recognized that "Delaware law imposes upon a board of directors the fiduciary duty to disclose fully and fairly all material facts within its control that would have a significant effect upon a stockholder vote.”
Stroud v. Grace,
Del.Supr.,
. In
Arnold,
this Court held that "claims alleging disclosure violations that do not otherwise fall within any exception are protected by Section 102(b)(7) and any certificate of incorporation provision ... adopted pursuant thereto.”
Arnold v. Society for Savings Bancorp, Inc.,
. In its appeal in
Cede II,
Cinerama abandoned "its claim that the directors acted in bad faith.”
Cede II,
. "The duty of the directors of a company to act on an informed basis ... forms the duty of care element of the business judgment rule.” Id. at 367.
. The Court of Chancery properly observed on remand: “While in this case the effect of the ‘business judgment rule' has been held to have been exhausted and its presumption no longer of any consequence, the law of fiduciary duties of corporate directors is older and more basic than the modemly popular ‘business judgment rule.' ”
Cinerama,
. In
Rabkin v. Philip A. Hunt Chem. Corp.,
Del.Supr.,
[T]he trial court's narrow interpretation of Weinberger would render meaningless our extensive discussion of fair dealing found in that opinion. In Weinberger we defined fair dealing as embracing "questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained.” While this duty of fairness certainly incorporates the principle that a cash-out merger must be free of fraud or misrepresentation, Weinberger’s mandate of fair dealing does not turn solely on issues of deception. We particularly noted broader concerns respecting the matter of procedural fairness.
Id. at 1104-05 (citations omitted).
. If the board fails to demonstrate entire fairness, the particular breach or breaches of fiduciary duty upon which substantive liability is based currently has great significance because of the provisions for eliminating or limiting liability set forth in 8
Del.C.
§ 102(b)(7).
See Arnold v. Society for Savings Bancorp, Inc.,
Del.Supr.,
§ 102. Contents of certificate of incorporation.
(b) In addition to the matters required to be set forth in the certificate of incorporation by subsection (a) of this section, the certificate of incorporation may also contain any or all of the following matters:
(7) A provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director:
(i) For any breach of the director's duty of loyalty to the corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under § 174 of this title; or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. All references in this paragraph to a director shall also be deemed to refer (x) to a member of the governing body of a corporation which is not authorized to issue capital stock, and (y) to such other person or persons, if any, who, pursuant to a provision of the certificate of incorporation in accordance with § 141(a) of this title, exercise or perform any of the powers or duties otherwise conferred or imposed upon the board of directors by this title.
8 DelC. § 102.
. This case involves pre-Van Gorkom conduct but did not reach this Court until eight years after Van Gorkom was decided. The Technicolor directors were exposed to personal liability in this action because the transaction pre-dated the Delaware legislature’s adoption of 8 Del.C. § 102(b)(7). Even that provision, however, does not provide protection against a breach of the duty of loyalty.
. In
Van Gorkom,
it was unnecessary for this Court to state whether the disclosure violation constituted a breach of the duty of care or loyalty or was a combined breach of both since 8
Del.C.
§ 102(b)(7) had not yet been enacted. The statute was, in faсt, a legislative response to this Court’s liability holding in
Van Gorkom. See also Arnold v. Society for Savings Bancorp, Inc.,
. While this Court noted that
Barnes
may still be "good law,” it is not a business judgment rule case.
Barnes
is more analogous to oversight cases.
See Lutz v. Boas,
Del.Ch.,
. The “first part” of the materiality test was addressed in
Cede II,
. In Cede II, this Court noted its concern that the reasonable person standard lacks precision. Id. at 364 n. 31.
. The Court of Chancery commented:
In candor this is unsurprising. On the contrary if a judge employing a reasonable person standard concluded that in fact a director’s judgment was affected by a factor or interest that would not have affected a reasonable person, it would be surprising if he would conclude that nevertheless there was no material conflict. The advantage of the reasonable person standard is that it does not call upon the court to evaluate the effect of eccentricities but leaves the question of materiality as an “objective" matter. But if the evidence shows that an “objectively” immaterial conflicting interest in fact did have a significant impact on the particular directors in question, there is room in the “independence” prong of the analysis to give that fact a disqualifying effect insofar as that director is concerned and one would expect a trial court to avoid obvious injustice by doing so. Thus while the June 21 opinion spoke in terms of a "reasonable person" and did not express that in fact these claimed interests did not interfere with the process to achieve stockholder’s welfare, that was my belief.
Cinerama,
. This quote contains language from the Cotut of Chancery's October 18, 1994 revision of its opinion. The original language, prior to revision, can be found at
Cinerama,
. In a footnote in its opening brief in this appeal, Cineramа states:
On its face, Section 144 applies only to contracts or transactions between (i) a corporation and one or more of its directors or officers, or (ii) a corporation and any other corporation or entity in which there are directors or officers in common or in which the directors or officers have a financial interest. Here the merger was neither a transaction between Technicolor and its directors nor between Technicol- or and another corporation in which any of the Technicolor directors were directors, officers, or had a financial interest. Although interests of a financial nature existed, those interests resulted from the transaction itself. Such interests are not contemplated by the statute. By its terms Section 144 would only apply if Kamerman, Sullivan, Ryan and the others had a financial interest in MAF....
Moreover, the statute speaks only to “financial interests” and conflicts arising from fiduciaries appearing on both sides of the transaction. On its face the statute does not encompass transactions tainted by influences affecting a director's independence....
. A board of which a majority of directors is interested is not a "neutral decision-making body.”
See, e.g., Paramount Communications, Inc. v. QVC Network, Inc.,
Del.Supr.,
. The Court of Chancery noted that "Sullivan, the only director with a found, material conflict, fully disclosed that interest to the disinterested members of the board and the contract was thereafter approved by them."
Cinerama,
. Technicolor’s legal counsel testified at trial that:
The draft served up by counsel for MacAn-drews had a prohibition not only against Technicolor approving or recommending or soliciting any competing proposal but also against Technicolor engaging in discussions with anyone else or furnishing information to anyone else. Those last two points were negotiated out. We said that if another proposal comes along at a better price, even if we can't solicit such a proposal, we should be free to negotiate — excuse me. We should be free to furnish information and engage in rather than solicit discussions with another prospective purchaser.
. In a footnote, in support of that proposition, the Court of Chancery cited
Paramount Communications, Inc. v. QVC Network, Inc.,
Del.Supr.,
. In the absence of a finding of liability, this Court, like the Court of Chancery, need not express an opinion regarding the merit of the defendants’ reliance on 8 Del.C. § 141(e), as amended in 1987, as an affirmative defense.
. Although the flaw in this proceeding was the failure to make a market check, there is "no single blueprint” under Delaware law that a board of directors must follow to fulfill its obligation to seek the best value reasonably available to the stоckholders.
Paramount Communications, Inc. v. QVC Network, Inc.,
Del.Supr.,
.In
Barkan,
an appeal from a Court of Chancery approval of a settlement, this Court noted that the board of directors might accept a single offer without a canvass of the market, if it has a reliable “body of evidence with which to evaluate the fairness of the transaction.”
Barkan v. Amsted Indus., Inc.,
. The Court of Chancery found that Goldman Sachs “opined that the price was fair after performing a number of different analyses, all of which are acceptable valuation bases. Goldman did conclude that a marginally higher price might be arranged for an MBO but even if one assumes that to be the case and infers from that that some buyer other than Perelman or management might have been able to pay such a price, such an inference would be supportive of the conclusion that $23 per share was an entirely fair price.”
Cinerama,
. This may have been the longest trial in the illustrious two hundred and three year history of the Delaware Court of Chancery. See Maurice A. Hartnett, The History of the Delaware Court of Chancery, 48 Bus.Law. 367 (1992); William T. Quillen & Michael Hanrahan, A Short History of the Delaware Court of Chancery, in Court of Chancery of the State of Delaware 1792-1992 (Historical Society for the Court of Chancery ed., 1992).
. Even though this litigation was protracted, it had none of the attributes of Jarndyce and Jarndyce, a case depicted and criticized by Charles Dickens in Bleak House. Charles Dickens, Bleak House (Norman Page ed., Penguin Books 1971) (1853). The presentations by the attorneys for all parties were paragons of professional advocacy from the inception of this proceeding through its conclusion with this appeal. The exemplary manner in which this litigation proceeded through the Court of Chancery demonstrates why that institution is held in such high regard. See William H. Rehnquist, The Prominence of the Delaware Court of Chancery in the State-Federal Joint Venture of Providing Justice, 48 Bus.Law. 351 (1992); E. Norman Veasey, The National Court of Excellence, 48 Bus.Law. 357 (1992).