Exhibit 10.35

THIRD AMENDMENT TO CREDIT AGREEMENT

THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of
March 15, 2006, by and between NATURAL ALTERNATIVES INTERNATIONAL, INC., a
Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”).

RECITALS

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of May 1, 2004, as amended from time to time (“Credit Agreement”).

WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect said changes.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree that the Credit Agreement
shall be amended as follows:

1. Section 1.1 (a) is hereby amended by deleting “Eight Million Dollars
($8,000,000.00)” as the maximum principal amount available under the Line of
Credit, and by substituting for said amount” Twelve Million Dollars
($12,000,000.00),” with such change to be effective upon the execution and
delivery to Bank of a promissory note dated as of March 15, 2006 (which
promissory note shall replace and be deemed the Line of Credit Note defined in
and made pursuant to the Credit Agreement) and all other contracts, instruments
and documents required by Bank to evidence such change.

2. The first sentence of Section 1.1 (b) is hereby deleted in its entirety, and
the following substituted therefor:

“Outstanding borrowings under the Line of Credit, to a maximum of the principal
amount set forth above, shall not at any time exceed an aggregate of eighty-five
percent (85%) of Borrower’s eligible accounts receivable, plus fifty percent
(50%) of the value of Borrower’s eligible inventory (exclusive of work in
process and inventory which is obsolete, unsaleable or damaged), with value
defined as the lower of cost or market value; provided however, that outstanding
borrowings against inventory shall not at any time exceed an aggregate of Six
Million Dollars ($6,000,000.00) however the outstanding borrowings against such
inventory shall not at any time exceed eligible accounts receivable.”

 

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3. Section 1.1(b)(viii) is hereby deleted in its entirety, and the following
substituted therefor:

“(viii) that portion of any account from an account debtor which represents the
amount by which Borrower’s total accounts from said account debtor exceeds
twenty-five percent (25%) of Borrower’s total accounts, except that Borrower’s
total accounts from account debtors Mannatech, Inc. and a new account debtor
acceptable to Bank shall not exceed thirty-five percent (35%) as determined by
semi-monthly report pursuant to Section 4.3(d) below;”

4. The following is hereby added to the Credit Agreement as Section 1.4.1:

“SECTION 1.4.1 LOAN COMMITMENT.

(a) Loan Commitment. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make advances to Borrower from time to time up to and including
May 31, 2006, not to exceed the aggregate principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000.00) (“Loan Commitment”), the proceeds of
which shall be used for Borrower’s working capital needs associated with the
orders from a new account debtor acceptable to Bank. Borrower’s obligation to
repay advances under the Loan Commitment shall be evidenced by a promissory note
dated as of March 15, 2006 (“Loan Commitment Note”), all terms of which are
incorporated herein by this reference.

(b) Borrowing and Repayment. Borrower may from time to time during the term of
the Loan Commitment borrow and partially or wholly repay its outstanding
borrowings, provided that amounts repaid may not be reborrowed, subject to all
the limitations, terms and conditions contained herein; provided however, that
the total outstanding borrowings under the Loan Commitment shall not exceed the
maximum principal amount available thereunder, as set forth above. The
outstanding principal balance of the Loan Commitment shall be due and payable in
full on May 31, 2006.

(c) Prepayment. Borrower may prepay principal on the Loan Commitment solely in
accordance with the provisions of the Loan Commitment Note.”

5. The first paragraph of Section 1.7 is hereby deleted in its entirety, and the
following substituted therefor:

“As security for all indebtedness of Borrower to Bank under the Line of Credit
and Loan Commitment, Borrower hereby grants to Bank security interests of first
priority in all EJorrower’s accounts

 

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receivable and other rights to payment, general intangibles, inventory,
equipment and fixtures.”

6. Section 4.3.(d) is hereby deleted in its entirety, and the following
substituted therefor:

“(d) not later than 15 days after and as of the end of each month, an inventory
collateral report, an aged listing of accounts receivable and accounts payable,
and a reconciliation of accounts; semi-monthly collateral report if Borrower
elects to use 35% concentration allowance for Mannatech, Inc. and a new account
debtor acceptable to Bank, and not later than 30 days after and as of the end of
each May and November, a list of the names, addresses and contact phone numbers
of all Borrower’s account debtors;”

7. Sections 4.9.(b) and (d) are hereby deleted in their entirety, and the
following substituted therefor:

“(b) Total Liabilities divided by Tangible Net Worth not greater than 1.75 to
1.0 until fiscal year end June 30, 2006, not greater than 1.25 to 1.0 from
July 1, 2006 through June 30, 2007 and not greater than 1.0 to 1.0, thereafter,
with “Total Liabilities” defined as the aggregate of current liabilities and
non-current liabilities less subordinated debt, and with “Tangible Net Worth” as
defined above.

(d) Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal
quarter end, determined on a rolling 4-quarter basis, with “Fixed Charge
Coverage Ratio” defined as the aggregate of net profit after taxes plus
depreciation expense, amortization expense and net contributions, divided by the
aggregate of the current maturity of long-term debt and capitalized lease
payments.”

8. Except as specifically provided herein, all terms and conditions of the
Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.

9. Borrower hereby remakes all representations and warranties contained in the
Credit Agreement and reaffirms all covenants set forth therein. Borrower further
certifies that as of the date of this Amendment there exists no Event of Default
as defined in the Credit Agreement, nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute any such
Event of Default.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first written above.

 

NATURAL ALTERNATIVES INTERNATIONAL, INC.

   

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:   /S/    JOHN REAVES            

By:

  /S/    BERNIE PALMER        

Title:

  CFO       Bernie Palmer         Vice President By:   /s/    RANDY
WEAVER               Title:   President      

 

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