The Court declared that, in certain limited circumstances indicating that the "sale" or "break-up" of the company is inevitable, the fiduciary obligation of the directors of a target corporation are narrowed significantly, the singular responsibility of the board being to maximize immediate stockholder value by securing the highest price available.

In such a context, that conduct can not be judicially reviewed pursuant to the traditional business judgment rule, but instead will be scrutinized for reasonableness in relation to this discrete obligation.

CEO Ronald Perelman of Pantry Pride approached the Revlon corporation, proposing either a negotiated transaction or, if necessary, a hostile tender offer, at a price of between $42 and $45 per share.

The terms of the proposed deal importantly included a waiver of the restrictive covenants contained in the notes issued by Revlon in the earlier repurchase.

The announcement of the proposed deal, and in particular the anticipated waiver of the covenants, sent the trading value of the notes into a steep decline, engendering threats of litigation from now irate noteholders.

Less than a week following Pantry Pride's $56.25 offer, it struck a deal with Forstmann pursuant to which Forstmann would pay $57.25 per share conditioned on its receipt of a lock-up option to purchase one of Revlon's important business divisions at a discounted price should another acquirer secure 40% or more of Revlon's outstanding stock, a $25 million termination fee, a restrictive no-shop provision precluding the Revlon board from negotiating with Pantry Pride or any other rival bidder except under very narrow circumstances, removal of the Note Purchase Rights, and waiver of the restrictive covenants contained in the recently issued notes.

Simultaneously, it filed a claim in the Court of Chancery, seeking interim injunctive relief to nullify the asset option, the no-shop, the termination fee and the Rights.

The Court of Chancery found that, by thus pursuing their personal interests rather than maximizing the sale price for the benefit of the shareholders, the Revlon directors had breached their duty of loyalty.

First, the Court reviewed Pantry Pride's challenges to the Revlon board's defensive actions: the adoption of a poison pill and the consummation of the repurchase program.

The Court was not swayed by defendants' claims that its concessions to Forstmann in fact resulted in a higher price than would otherwise have been available, while simultaneously enhancing the interests of noteholders by shoring up the sagging market for its outstanding notes.

The opinion provides two main passages meant to guide the actions of future boards, regarding when duties attach that lead to enhanced judicial scrutiny.

[4] The other portion of the opinion which provides guidance can be found in the following: The Revlon board argued that it acted in good faith in protecting the noteholders because Unocal permits consideration of other corporate constituencies ...

[2] Given that factual and legal backdrop, the court concluded that the Revlon board impermissibly ended the "intense bidding contest on an insubstantial basis.

[10] The Unocal standard is focused on the erection of defensive tactics by the target board, and involves reasonableness review of legitimate corporate threat and proportionality.

Expanding the scope of the intermediate enhanced scrutiny standard of judicial review previously announce in Unocal and Moran v. Household International, Inc., the Revlon opinion gave rise to years of academic debate and decisional law with respect to the events that should be deemed to trigger its application.

Even today, questions continue to persist as to the extent to which the doctrine has been absorbed into the traditional duty of care, particularly in connection with so-called ownership transactions such as mergers, and its interplay with the Unocal test traditionally applicable to defensive board action to fend off a hostile acquisition bid, and more recently to deal protection devices contained in merger agreements.

However, recent Delaware litigation deferred to an independent's board decisions to not engage in negotiations with a competing bidder to try to obtain improved terms after a merger agreement had been signed.