* The HONORABLE JAMES M. ROSENBAUM, United State s Distr ict Judge for the District of Minnesota , sitting by designation. ___________ 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, Circui t Judge, and ROSENBAUM, District Judge. *

___________ ROSENBAUM, District Judge.

Compr ehensive Care Corporation (“CompCare”) was the parent of it s who lly-owned subsidiary, RehabCare Corporation (“RehabCare”) until mid

19 91. Subsequent to this time, however, CompCare required additiona l funding. To secure t hese funds, CompCare contractually allowed RehabCare to purchase a number of RehabCare shares. RehabCare purchased the shares fromCompCare in October, 1992. Thereafter, CompCare claimed RehabCare bre achedthe share-purchase contract. CompCare brought claims o f securities fraud, breach of contract, and common law fraud. A jur y returned a $2,581,250.00 verdict in CompCare’s favor. In April, 1995, the district court-2-

enteredjudgment in the amount of the jury award. RehabCar e appeals the district court’s entry of judgment. We reverse.

I. Since mid-1991, CompCare has t wice sold major portions of its RehabCare stock. CompCare sol d the first portion of its RehabCare sha res in a public offering, retaining 48 percent of RehabCare’ s stock, in mid-1991. As part of this transaction, CompCare o btained two seats on RehabCare’s boardof directors. During the summer of 1992, CompCare decided to sell its remaining RehabCare stock

. CompCare approached RehabCare, and RehabCare indicated it wa s willing to purchase the stock.

In early August, 1992, the parties agreed in principle tha t RehabCare would buy 1,875,000 shares of its stock for $8 per share. Th ereafter, at CompCare’s August 26, 1992, board meeting , Comp Care’s president reported that another buyer was willing t o purchase the stock at $10 per share or more. No such offer wa s tendered, however, and CompCare needed to conclude the sale. A t the August 26 meeting, the CompCare board authorized the sto ck sale to RehabCare.
On August 27, 1992, CompCare and RehabCare representatives m et to discuss the pending transaction. During that meeting, Re habCare received a letter from Continental Medical Systems, Inc. (“CMS”), offering to acquire RehabCare for $10 per share. Knowing of this off er, CompCare agreed to sell the 1,875,000 shares to RehabCar e for $8 per share on the condit ion that, if RehabCare were acquired wit hin12 months of the redemption, RehabCare would pay CompCar e the am ount by which the sale price exceeded $8 per share. Th e partie s 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.-3--4-

Mean while, during early August, 1992, RehabCare prepared a shareholder rights plan (a “po ison pill”) for consideration by its bo ardof directors. Under the plan, if a purchaser acquired a certain percentage of RehabCare stock, the acquisition wouldconfer prefer redshare rights on existing shareholders. On August 19 , 1992 -- 13 days before the execution of the CompCare/RehabCar e sto ck 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 Ca rmany and Harvey Felsen, each of whom received a copy o f the August 19, 1992, materials. Carmany was CompCare’s president and chie f executive officer until August 26, 1992. Felsen was a CompCare director and one of t hree members of CompCare’s executive committee. RehabCare’s board adopted the poison pill on September 21, 1992.

Also i n August, 1992, when CMS first offered to acquir e Reh abCare, RehabCare’s board decided the $10 per share offer wa s too low. As a result, on August 28, 1992, Rehabcare told CMS i t
wa s not interested in being acquired. On October 8, 1992, CM S 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 to o low. Although CMS and RehabCa re continued to communicate, CMS did not make another offer to acquire RehabCare. RehabCare was no t acquired within 12 months of the CompCare stock purchase.

CompCare filed this action on October 30, 1992, allegin g securities fraud under § 10(b) of the Securities Exchange Act o f 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, breach of contract, and
commonlaw fraud. CompCare alleged that under the redemptio n agreement, RehabCare had a duty to pursue an acquisition. C ompCare asserts that RehabCare breached this duty by adopting a pois on pill and by refusing to negotiate with CMS. After a nine-day tri al, the-5-

jury re turned a verdict in favor of CompCare on two of thre e securities fraud claims and on its breach of contract claim. The-6-

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

II. A. RehabC are first argues it did not breach its contract wit h CompCare, asserting that the r edemption agreement did not impose a dut yto pursue an acquisition. Whether the redemption agreemen t imposedsuch a duty on RehabCare is a question of law, which w e 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 o f Control Event’ . . . of RehabC are, 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 acondition precedent. Absent the occurrence of the contractuallyagreed “Change of Control Even t,” the clause imposes no obligation on RehabCare.
Our decisions differentiate between a promise and a conditio n. “A promise is an assurance fro m one party that performance will be
re nderedin the future, given in a manner that the other part y couldrely on it.” United States v. Gerth , 991 F.2d 1428, 143 4 (8th Cir. 1993). A condition, by contrast, “creates no rights or du ties in and of itself, but only limits or modifies rights o r duties.” Id. The SAR language contained no assurance tha t RehabCare would pursue an acqu isition. 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, ”-7-

“when,” “after,” “as soon as,” and “subject to” traditionall y indicate conditions, not promises).-8-

Further, contrary to CompCare’s assertions, the implie d covenant of good faith and fair dealing did not impose on Re habCare the du ty to pursue an acquisition. The law does not allow th e impliedcovenant of good faith and fair dealing to be a n everfl owing cornucopia of wished-for legal duties; indeed, th e
co venant cannot give rise to new obligations not otherwis e containedin a contract’s express terms. Glass v. Mancuso , 44 4 S.W.2d 467, 478 (Mo. 1969). The implied covenant simply pr ohibits
one party from “depriv[ing] the other party of its expecte d 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 America n Business Interiors, Inc. v. Haworth, Inc. , 798 F.2d 1135, 11 42 (8th Cir. 1986) (“Each party must do nothing destructive of the othe r party’s right to enjoy the fruits of the contract and do eve rything the contract presupposes they will do to accomplish its purp ose.”).

He re, RehabCare did nothing that deprived CompCare of it s exp ectedcontractual benefits. Certainly, the SARs had no valu e absent RehabCare’s acquisition, but this is no more than can b e said whenever a contractual condition precedent does not occur

. CompCare gambled that RehabCar e would be acquired within a year of the execution of the redemptio n agreement. Its gamble did not pay off.

We sim ilarly reject CompCare’s assertion that the implie d 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. ChamplinPetroleum Co. , 692 F.2d 43, 47 (8th-9-

Cir. 1982)). CompCare’s implied covenant claims permit no r ecovery against RehabCare on these facts.-10- B. RehabCare further argues that CompCare’s securities frau d claim s must fail because, as a matter of law, CompCare knew al l facts material to the redempti on transaction. We agree. CompCare claims the securities fraud occurred when RehabCare failed t o disclose its consideration of a poison pill. But CompCare’s tw o representatives on RehabCare’s board of directors knew, well before th e redemption agreement was executed, that RehabCare wa s considering this plan.
Knowledge obtained by a corporation’s key employees, officer s, and directors, obtained in the course of their duties, is ge nerally imputedto the corporation. Acme Precision Prods., Inc. v

. AmericanAlloys 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). W e
rec ognize, of course, that if the employee, officer, or directo r has an interest adverse to the corporation, his knowledge is not to be imputed. First Nat’l Bank of Sikeston v. Transamerica In s. 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 no t available here.
CompCare’s representatives sat on RehabCare’s board through an explic it agreement between the two corporations. Their presenc e
was at CompCare’s behest and was in -- and not opposed to -

- Co mpCare’s interest. As such, the knowledge of CompCare’ s dire ctors 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 th e district court.-11--12-

A true copy.

Attest:

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