MANCHESTER BUSINESS SERVICES, INC

                               RETAINER AGREEMENT



THIS AGREEMENT (the "Agreement") dated as of April 7, 1999 confirms that HEALTH
FITNESS CORPORATION ("COMPANY") has engaged, as of the date hereof, Manchester
Business Services, Inc. ("MBSI") to perform certain Organization
Reengineering/Renewal Services (the "Services") for COMPANY. In connection with
the foregoing, COMPANY and MBSI agree that:

         1.       Retention. COMPANY hereby retains MBSI on an exclusive basis,
                  subject to COMPANY'S existing consulting arrangements, in
                  connection with providing Organization Reengineering/Renewal
                  Services for COMPANY as described herein.

         2.       Termination. The initial terms of this Agreement shall be for
                  twelve (12) months commencing on the date hereof. During the
                  initial twelve (12) month term, this Agreement may not be
                  terminated by either COMPANY or MBSI except for failure to
                  provide, using reasonable business practices, the Services
                  described herein. Following expiration of the initial twelve
                  (12) month term of this Agreement, either MBSI or COMPANY may
                  terminate this Agreement at any time upon 30 days written
                  notice, delivered to the other, and without liability or
                  continuing obligation on the part of MBSI. However, COMPANY'S
                  obligations to MBSI shall continue after the termination of
                  this Agreement.

         3.       Services to be performed:

                  A.       Evaluate and analyze the business operations,
                           financing and capitalization of the COMPANY and its
                           Divisions and make recommendations for improvement to
                           COMPANY's management and the Board. MBSI's activities
                           will include, but not be limited to; review of cash
                           flow projections, review of cost accounting systems,
                           review of inventory controls, review of overall
                           accounting/control environment, recommendations for
                           expediting collection of accounts receivable,
                           negotiations with trade creditors, negotiations with
                           banks regarding credit agreements, negotiations with
                           major suppliers/customers regarding outstanding
                           issues, review of sales/pricing mechanisms, and
                           assistance with decision/management oversight and
                           processes.

                  B.       Develop a short-term intervention management plan for
                           the COMPANY to achieve positive cash
                           flow/profitability.

                  C.       Review and recommend appropriate actions regarding
                           impending NASDAQ de-listing.

                  D.       Evaluate "Strategic Options" for the COMPANY
                           including merger, sale, divestiture of division(s)
                           and or the COMPANY's assets (including its corporate
                           structure). If it is determined that a sale
                           transaction is an appropriate strategic option for
                           the COMPANY, the COMPANY may decide to retain
                           Manchester Financial Group, Inc., upon terms to be
                           mutually agreed.

                  E.       Make recommendations regarding refinancing as
                           appropriate. Should MBSI become involved in such
                           financing activities they would be handled under a
                           separate agreement with Manchester Financial Group,
                           Inc. ("MFGI"), an affiliate of MBSI. Fees for such
                           services are described in Section 4C herein.

                  F.       Develop/implement strategy for communications to
                           shareholders, employees, creditors and equity
                           markets.

                  G.       Reengineer operations to achieve acceptable gross
                           margins.

                  H.       Refocus/restructure the organization in accordance
                           with the intervention management plan.

                  I.       Assure organizational effectiveness through
                           appropriate policies, procedures, HR management and
                           system controls.

                  J.       Develop reliable financial reporting
                           systems/procedures including the timely preparation
                           and review of Bank, SEC, NASDAQ and other Regulatory
                           reporting/compliance documents.

                  K.       Provide the Board with timely updates on progress.
                           Seek audit committee approval for any significant
                           changes in the COMPANY's current financial reporting
                           policies and procedures.

                  L.       Assist the COMPANY in developing a definitive
                           business plan including, but not limited to,
                           business/industry description, management team
                           resumes, products/services features and functions,
                           market research/analysis, estimated market
                           share/sales, design/development plans, operations
                           plan, overall schedule and critical risks/problems.

         It is our mutual understanding that MBSI would serve as consultants to
         the COMPANY. However, MBSI will be vested by the COMPANY's Board with
         the appropriate authority to effectively execute the intervention
         management plan, subject to prior approval thereof by the COMPANY's
         Board, and the Services described herein. MBSI will report only to the
         COMPANY's Board of Directors.

         MBSI does not provide legal advice and the COMPANY agrees to rely upon
         advice from its own legal counsel as to all legal matters. COMPANY
         acknowledges it is entering into this Retainer Agreement: (i) without
         any undue influence by an third party including any creditor, and (ii)
         without any promises or representations by MBSI or any third party as
         to actual results that will be achieved by MBSI.


         4.       Fees and Expenses.

                  A.       A monthly fee of $25,000 beginning with the effective
                           date of MBSI's engagement and on the same day of each
                           month thereafter for a period of eleven (11) months.
                           If the COMPANY enters into the Engagement Agreement
                           referred in paragraph 3.D above for investment
                           banking services, the $25,000 monthly fee would then
                           be allocated between MBSI and MFGI.

                  B.       Notwithstanding the foregoing and except as provided
                           below in this paragraph if whether or not directly or
                           indirectly introduced by MBSI or its affiliate MFGI,
                           during the term of this Agreement the COMPANY enters
                           into a contract or letter of intent to sell, exchange
                           or otherwise dispose of all or a material (more than
                           10%) portion of the COMPANY, whether accomplished by
                           a sale of stock or assets by or through the COMPANY
                           and/or its shareholders, and if the COMPANY engages
                           MBSI or MFGI to assist it in such transaction, then
                           MBSI or MFGI will be paid a financial advisory fee at
                           the closing of such transaction, with no deductions
                           for retainers previously paid by the COMPANY of two
                           and one half percent (2.5%) of total transaction
                           consideration.

                           If it is determined by the COMPANY's Board that MBSI
                           or MFGI is to be involved in investment banking
                           activities with respect to the sale of the physical
                           therapy business of the COMPANY to Health South or
                           Healthcare Innovations, the accomplishment fee
                           payable to MFGI shall be reduced by twenty-five
                           percent, but in no event less than $150,000.00.

                  C.       In the event, at the request of the COMPANY's Board,
                           MBSI or MFGI arrange for debt or equity financing,
                           the following fees and Warrants would be payable,
                           unless otherwise agreed at the time of such
                           engagement:

                           o        Senior Debt Financing: Two percent (2%)

                           o        Junior Debt Financing: Five percent (5%)

                           o        Equity Financing: Eight percent (8%)

                           In addition, with regard to each Financing, MBSI/MFGI
                           or its designees will be granted a Warrant or
                           Warrants to purchase 100,000 shares of the COMPANY's
                           common stock (the "Warrants"). Such Warrants will be
                           exercisable at any time for a period of five (5)
                           years from the date of issuance at an exercise price
                           equal to the average closing price of the COMPANY's
                           stock during the ten (10) trading days before the
                           announcement of the respective Transaction. The
                           Warrants shall contain a net exercise provision,
                           customary anti-dilution provisions and shall provide
                           for participation of the shares underlying the
                           Warrants on a "piggy-back" basis in any registration
                           by the COMPANY during the Warrants duration and two
                           (2) years thereafter, and registration to be at the
                           expense of the COMPANY. The Warrants will also
                           contain ratchet-down provisions which will result in
                           the repricing of the Warrants in the event that
                           shares, options or warrants are subsequently issued
                           by the COMPANY at a lower price.

                  D.       COMPANY agrees to, on an as-incurred basis, as
                           documented by MBSI, to reimburse MBSI for all
                           reasonable out-of-pocket expenses incurred in
                           connection with the rendering of the Services. MBSI
                           will submit expense reimbursement bills on a monthly
                           basis, and COMPANY agrees that they will be paid
                           within 10 days. Any individual expense in excess of
                           $200 will be subject to COMPANY's prior written
                           approval. MBSI's fees do not include any fees which
                           may be charged by other related or non-related
                           entities involved in pursuit of the execution of the
                           Services outlined herein. Such other fees may
                           include, but are not limited to, those charged by
                           legal counsel, auditors and tax advisors, appraisal
                           companies, environment testing concerns, lenders,
                           industry consultants and other consultants or
                           professionals as may be mutually determined to be
                           necessary.

         5.       Cooperation. COMPANY will cooperate with MBSI and provide,
                  where possible, information reasonably required by MBSI in
                  connection with fulfilling service obligations under this
                  Agreement. In addition, MBSI will require the involvement of,
                  and COMPANY agrees to provide reasonable access to the Senior
                  Management of COMPANY.

         6.       Confidentiality.

                  A.       This Agreement and its contents, including any
                           proprietary COMPANY information, will be treated by
                           COMPANY and MBSI as confidential except as required
                           by law. MBSI will also treat as confidential the
                           contemplated plans and strategies of COMPANY. Neither
                           COMPANY nor MBSI will, unless required by a statute,
                           rule, regulation, agency or court, make any public or
                           private statements about COMPANY, their financing or
                           structure, without the prior consent of the other
                           parties to this Agreement.

                  B.       Without limiting the generality of Section 6(a), any
                           advice rendered by MBSI pursuant to this Agreement
                           may not, unless required by an statute, rule,
                           regulation, agency or court, be disclosed publicly or
                           privately in any manner without MBSI's prior written
                           approval and will be treated as confidential.

                  C.       COMPANY will provide MBSI with all reasonable
                           financial and other information requested by MBSI for
                           the purpose of rendering its Services pursuant to
                           this Agreement. All non-public information given to
                           MBSI by COMPANY will be treated by MBSI as
                           confidential by it and will not be used by MBSI for
                           any purposes other than the performance of the
                           Services rendered to COMPANY under this Agreement.

                  D.       With respect to information about their businesses
                           provided by COMPANY, MBSI agrees that, for a period
                           of one (1) year, the information will be kept
                           confidential by it and that access to the information
                           will be limited to those persons under its
                           supervision who may have a need to know the
                           information. MBSI further agrees that such
                           information shall be deemed to be the property of
                           COMPANY and, when in tangible form, shall be returned
                           to COMPANY upon request. COMPANY's information shall
                           be used only for purposes expressed herein and may be
                           used for other purposes only with the prior written
                           approval of COMPANY. MBSI also agrees to keep
                           confidential in accordance herewith any analysis,
                           compilation, study, or other documents prepared by
                           MBSI for use in connection with the above-mentioned
                           Services.

                  E.       In the event that any party hereto, or either of its
                           representatives, are requested or required (by oral
                           questions, interrogatories, requests for information
                           or documents, subpoena, Civil Investigative Demand,
                           similar process or otherwise), to disclose any
                           information of the other party, it is agreed that the
                           requested or required party will provide the other
                           with prompt notice of such request so that the other
                           may seek an appropriate protective order and/or waive
                           compliance with the provisions of this Agreement. It
                           is further agreed that, if in the absence of a
                           protective order or the receipt of a waiver
                           hereunder, any party or its representatives is
                           nonetheless, in the opinion of its respective
                           counsel, compelled to disclose information or else
                           stand liable for contempt or suffer other censure or
                           penalty or other adverse consequences, the requested
                           party or its representative may disclose such
                           information without liability hereunder.

                  F.       The phrase "information" does not include information
                           which (i) is or becomes available to the public other
                           than as a result of a disclosure in violation of the
                           terms hereof; (ii) was in the possession of a
                           respective party on a non-confidential basis prior to
                           its disclosure under this Agreement; or (iii) becomes
                           available on a non-confidential basis from a source
                           other than a party hereto or its respective
                           representative.

                  G.       Because damages at law would be difficult to
                           ascertain in the event of the failure or refusal of
                           either party hereto to comply with the provisions of
                           this paragraph 6, each party, in addition to, and not
                           in limitation of, any of the rights, remedies or
                           damages available at law or in equity, shall (a) be
                           entitled to seek or restrain any such breach and (b)
                           be entitled to seek the recovery from the breaching
                           party of all costs and expenses, including reasonable
                           attorneys' fees in connection therewith, incurred by
                           the party seeking to enforce or prevent any breach or
                           threatened breach of this paragraph 6.

         7.       Indemnification. If, in connection with any Services or
                  matters that are the subject of this Agreement, MBSI becomes
                  involved in any capacity in any action or legal proceeding,
                  pending or threatened, COMPANY agrees (i) to reimburse MBSI
                  for the reasonable legal fees, disbursements of counsel and
                  other expenses (including the cost of investigation and
                  preparation) incurred by MBSI as such fees, disbursements and
                  other expenses are incurred; and (ii) to indemnify, defend,
                  and hold MBSI harmless against any losses, claims, damages, or
                  liabilities, joint or several, to which MBSI may become
                  subject arising out of any such action or legal proceeding
                  unless such claims arise from MBSI's gross negligence or
                  willful misconduct as determined in a judicial proceeding.

         8.       Survival. The provisions of this Agreement shall, where
                  applicable, survive the expiration of the period of this
                  Agreement, including any extensions thereof.

         9.       Entire Agreement. This Agreement constitutes the entire
                  agreement between the parties hereto with respect to the
                  subject matter hereof and supersedes and cancels as of the
                  date hereof all prior understandings, written or oral, with
                  respect to the subject matter hereof.

         10.      Governing Law. This Agreement and the agreements contained
                  herein shall be governed by, and construed in accordance with,
                  the laws of the State of Minnesota, without giving effect to
                  the principles of conflicts of laws thereof.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.


MANCHESTER BUSINESS SERVICES, INC.

By       __________________________________________________

Its      __________________________________________________

HEALTH FITNESS CORPORATION


By       __________________________________________________

Its      __________________________________________________