                                  ___________

                                  No. 95-3328
                                  ___________

Comprehensive Care Corporation, *
                                        *
            Appellee,                   *
                                        * Appeal from the United
                  v.                          * States District Court for
                                        * the Eastern District of
RehabCare Corporation,                  * Missouri
                                        *
            Appellant.            *

                                  ___________

                          Submitted: June 10, 1996

                          Filed: October 22, 1996
                                ___________

Before RICHARD S. ARNOLD, Chief Judge, MORRIS SHEPPARD ARNOLD,            Circuit
Judge, and ROSENBAUM,* District Judge.
                               ___________

ROSENBAUM, District Judge.


     Comprehensive Care Corporation (“CompCare”) was the parent of its
wholly-owned subsidiary, RehabCare Corporation (“RehabCare”) until mid-
1991. Subsequent to this time, however, CompCare required additional
funding.   To secure these funds, CompCare contractually allowed RehabCare
to purchase a number of RehabCare shares.       RehabCare purchased the shares
from CompCare in October, 1992.       Thereafter, CompCare claimed    RehabCare
breached   the   share-purchase   contract.      CompCare   brought   claims   of
securities fraud, breach of contract, and common law fraud.             A jury
returned a $2,581,250.00 verdict in           CompCare’s favor.       In April,
1995, the district court




       *The HONORABLE JAMES M. ROSENBAUM, United States
       District Judge for the District of Minnesota,
       sitting by designation.
entered judgment in the amount of the jury award.                 RehabCare
appeals the district court’s entry of judgment.           We reverse.


                                    I.
     Since mid-1991, CompCare has twice sold major portions of its
RehabCare stock.     CompCare sold the first portion of its RehabCare
shares in a public offering, retaining 48 percent of RehabCare’s
stock, in mid-1991.    As part of this transaction, CompCare obtained
two seats on RehabCare’s board of directors.        During the summer of
1992, CompCare decided to sell its remaining RehabCare stock.
CompCare approached RehabCare, and RehabCare indicated it was
willing to purchase the stock.


     In early August, 1992, the parties agreed in principle that
RehabCare would buy 1,875,000 shares of its stock for $8 per share.
Thereafter,     at   CompCare’s   August    26,   1992,   board   meeting,
CompCare’s president reported that another buyer was willing to
purchase the stock at $10 per share or more.           No such offer was
tendered, however, and CompCare needed to conclude the sale.            At
the August 26 meeting, the CompCare board authorized the stock sale
to RehabCare.


     On August 27, 1992, CompCare and RehabCare representatives met
to discuss the pending transaction.        During that meeting, RehabCare
received a letter from Continental Medical Systems, Inc. (“CMS”),
offering to acquire RehabCare for $10 per share.          Knowing of this
offer, CompCare agreed to sell the 1,875,000 shares to RehabCare
for $8 per share on the condition that, if RehabCare were acquired
within 12 months of the redemption, RehabCare would pay CompCare
the amount by which the sale price exceeded $8 per share.               The
parties referred to these "stock appreciation rights" as “SARs”.
The parties signed a letter of intent embodying these terms, and on
September 1, 1992, the redemption agreement was executed.

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       Meanwhile, during early August, 1992, RehabCare prepared a
shareholder rights plan (a “poison pill”) for consideration by its
board of directors.      Under the plan, if a purchaser acquired a
certain percentage of RehabCare stock, the acquisition would confer
preferred share rights on existing shareholders.           On August 19,
1992 -- 13 days before the execution of the CompCare/RehabCare
stock    redemption   agreement   --   written   materials,   including   a
summary of the proposed plan, were sent to RehabCare’s directors.
At that time, CompCare’s two RehabCare board representatives were
James Carmany and Harvey Felsen, each of whom received a copy of
the August 19, 1992, materials.        Carmany was CompCare’s president
and chief executive officer until August 26, 1992.            Felsen was a
CompCare director and one of three members of CompCare’s executive
committee.    RehabCare’s board adopted the poison pill on September
21, 1992.


       Also in August, 1992, when CMS first offered to acquire
RehabCare, RehabCare’s board decided the $10 per share offer was
too low.     As a result, on August 28, 1992, Rehabcare told CMS it
was not interested in being acquired.            On October 8, 1992, CMS
raised its RehabCare bid to $11.25 per share.        On October 15, 1992,
RehabCare’s board met and decided $11.25 per share was still too
low.    Although CMS and RehabCare continued to communicate, CMS did
not make another offer to acquire RehabCare.           RehabCare was not
acquired within 12 months of the CompCare stock purchase.


       CompCare filed this action on October 30, 1992, alleging
securities fraud under § 10(b) of the Securities Exchange Act of
1934, 15 U.S.C. § 78j(b), and Rule 10b-5, breach of contract, and
common law fraud.       CompCare alleged that under the redemption
agreement, RehabCare had a duty to pursue an acquisition.         CompCare
asserts that RehabCare breached this duty by adopting a poison pill
and by refusing to negotiate with CMS.      After a nine-day trial, the

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jury returned a verdict in favor of CompCare on two of three
securities fraud claims and on its breach of contract claim.   The




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jury found in favor of RehabCare on the common law fraud claims,
and was unable to reach a verdict on CompCare’s third securities
fraud claim.    In April, 1995, the district court entered judgment,
pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.


                                 II.
                                  A.
     RehabCare first argues it did not breach its contract with
CompCare, asserting that the redemption agreement did not impose a
duty to pursue an acquisition.     Whether the redemption agreement
imposed such a duty on RehabCare is a question of law, which we
review de novo.


     We begin with the plain words of the parties’ September 1,
1992, redemption agreement.     The agreement provides that, “[i]f
within [12 months of the closing date] there occurs a ‘Change of
Control Event’ . . . of RehabCare, then RehabCare will be required
to pay CompCare” an additional sum. As a matter of law, this is not
the language of a promise.       Such language, instead, creates a
condition precedent.    Absent the occurrence of the contractually-
agreed “Change of Control Event,” the clause imposes no obligation
on RehabCare.


     Our decisions differentiate between a promise and a condition.
“A promise is an assurance from one party that performance will be
rendered in the future, given in a manner that the other party
could rely on it.”     United States v. Gerth, 991 F.2d 1428, 1434
(8th Cir. 1993).    A condition, by contrast, “creates no rights or
duties in and of itself, but only limits or modifies rights or
duties.”   Id.     The SAR language contained no assurance that
RehabCare would pursue an acquisition.   The language was, instead,
a conditional clause.    See, e.g., Standefer v. Thompson, 939 F.2d
161, 164 (4th Cir. 1991) (phrases such as “if,” “provided that,”

                                 -6-
“when,” “after,” “as soon as,” and “subject to” traditionally
indicate conditions, not promises).




                               -7-
       Further,   contrary    to    CompCare’s       assertions,     the      implied
covenant of good faith and fair dealing did not impose on RehabCare
the duty to pursue an acquisition.              The law does not allow the
implied    covenant    of    good   faith    and     fair   dealing      to    be   an
everflowing cornucopia of wished-for legal duties; indeed, the
covenant    cannot    give   rise    to   new   obligations        not    otherwise
contained in a contract’s express terms.                Glass v. Mancuso, 444
S.W.2d 467, 478 (Mo. 1969).         The implied covenant simply           prohibits
one party    from     “depriv[ing]    the    other    party   of    its    expected
benefits under the contract.”          Morton v. Hearst Corp., 779 S.W.2d
268, 273 (Mo. Ct. App. 1989) (citing Martin v. Prier Brass Mfg.
Co., 710 S.W.2d 466, 473 (Mo. Ct. App. 1986)); see also American
Business Interiors, Inc. v. Haworth, Inc., 798 F.2d 1135, 1142 (8th
Cir. 1986) (“Each party must do nothing destructive of the other
party’s right to enjoy the fruits of the contract and do everything
the contract presupposes they will do to accomplish its purpose.”).


       Here, RehabCare did nothing that deprived CompCare of its
expected contractual benefits.            Certainly, the SARs had no value
absent RehabCare’s acquisition, but this is no more than can be
said whenever a contractual condition precedent does not occur.
CompCare gambled that RehabCare would be acquired within a year of
the execution of the redemption agreement.             Its gamble did not pay
off.


       We similarly reject CompCare’s assertion that the implied
covenant of good faith and fair dealing imposed a fiduciary duty on
RehabCare that barred its adoption of a poison pill.                  The implied
covenant of good faith and fair dealing “does not transform a
business relationship into a fiduciary relationship.”                          W.K.T.
Distrib. Co. v. Sharp Elecs. Corp., 746 F.2d 1333, 1337 (8th Cir.
1984) (citing Bain v. Champlin Petroleum Co., 692 F.2d 43, 47 (8th


                                       -8-
Cir. 1982)).   CompCare’s implied covenant claims permit no recovery
against RehabCare on these facts.




                                -9-
                                          B.
      RehabCare further argues that CompCare’s securities fraud
claims must fail because, as a matter of law, CompCare knew all
facts material to the redemption transaction.                 We agree.         CompCare
claims the securities fraud occurred when RehabCare failed to
disclose its consideration of a poison pill.                      But CompCare’s two
representatives on RehabCare’s board of directors knew, well before
the   redemption     agreement      was        executed,     that     RehabCare        was
considering this plan.


      Knowledge obtained by a corporation’s key employees, officers,
and directors, obtained in the course of their duties, is generally
imputed to     the   corporation.          Acme    Precision       Prods.,      Inc.    v.
American Alloys      Corp.,   422    F.2d       1395,      1398   (8th     Cir.   1970);
Beetschen v. Shell Pipe Line Corp., 248 S.W.2d 66, 73-74 (Mo. Ct.
App.), aff’d on other grounds, 253 S.W.2d 785 (Mo. 1952).                               We
recognize, of course, that if the employee, officer, or director
has an interest adverse to the corporation, his knowledge is not to
be imputed.    First Nat’l Bank of Sikeston v. Transamerica Ins. Co.,
514 F.2d 981, 986 (8th Cir. 1975) (citing In re Torreyson’s Estate,
442 S.W.2d 110, 117 (Mo. Ct. App. 1969)).                   This exception is not
available here.


      CompCare’s representatives sat on RehabCare’s board through an
explicit agreement between the two corporations.                      Their presence
was at CompCare’s behest and was in -- and not opposed to --
CompCare’s     interest.      As    such,       the   knowledge       of      CompCare’s
directors     on   RehabCare’s     board       must   be    imputed      to    CompCare.
CompCare’s securities fraud claims must fail.


                                      III.
      For the foregoing reasons, we reverse the judgment of the
district court.

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A true copy.


     Attest:


          CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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