Document:

Seventh Amendment to Credit Agreement

 Exhibit 10.38 
 SEVENTH AMENDMENT TO CREDIT AGREEMENT 
 THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is
entered into as of June 1, 2009, 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. 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, thirty percent
(30%) of the value of Borrower’s eligible raw materials inventory, plus forty percent (40%) of the value of Borrower’s eligible finished goods inventory (exclusive of work in process and inventory which is obsolete, unsaleable or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 Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00); and
provided further, that outstanding borrowings against such inventory shall not at any time exceed eligible accounts receivable.” 
 2.
Section 1.4.(a) is hereby deleted in its entirety, and the following substituted therefor: 
 “(a) Foreign
Exchange Facility. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make available to Borrower a facility (the “Foreign Exchange Facility”) under which Bank, from time to time up to and including
November 1, 2010, will enter into foreign exchange contracts for the account of Borrower for the purchase and/or sale by 

  

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Borrower in United States dollars of foreign currencies designated by Borrower; provided however, that the contract limit shall not at any time exceed an
aggregate of One Million Eight Hundred Thousand United States Dollars (US$1,800,000.00). No foreign exchange contract shall be executed for a term which extends beyond November 1, 2010. Borrower shall have a “Delivery Limit” under the
Foreign Exchange Facility not to exceed at any time the aggregate principal amount of Zero United States Dollars (US$0.00) with PVD (“Payment versus Delivery”) which will require Borrower to provide funds before the currency is delivered
and this will eliminate the 1 or 2 business day settlement period and mitigate settlement risk. All foreign exchange transactions shall be subject to the additional terms of a Foreign Exchange Agreement dated as of May 1, 2004 (“Foreign
Exchange Agreement”), all terms of which are incorporated herein by this reference.” 
 3. 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, Borrowing Base Certificate, an aged listing of accounts receivable and accounts payable, and a reconciliation accounts; not later than 15 days after and as of the 15th and last day of each month,
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;” 
 4. Sections 4.9.(c) and (d) are hereby deleted in
their entirety, and the following substituted therefor: 
 “(c) Net income after tax for the fiscal quarter ending
June 30, 2009 not less than $250,000.00 and for each fiscal quarter thereafter not less than $1.00; Net loss for the fiscal year ending June 30, 2009 not to exceed $5,000,000.00 and thereafter net income after tax not less than $750,000.00
on an annual basis, determined as of each fiscal year. 
 (d) Fixed Charge Coverage Ratio not less than -1.95 to 1.00 as of
June 30, 2009, and not less than 1.25 to 1.00 as of each fiscal quarter end thereafter, 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.” 
  

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 5. Section 5.9. is hereby deleted in its entirety, and the following substituted therefor

 “SECTION 5.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all
or any portion of Borrower’s assets now owned or hereafter acquired, except any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date hereof, and liens to the extent they secure the
debt permitted under Section 5.4 hereof.” 
 6. Section 7.4. is hereby deleted in its entirety, and the following substituted
therefor: 
 “7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank’s prior written consent, Bank reserves the right to sell,
assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now
has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, or any collateral required hereunder.” 
 7. 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. 
 8. 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/ Mark A. LeDoux	 		 	By:	 	/s/ Bernie Palmer
		 		 		 		 	Bernie Palmer
	Title:	 	CEO	 		 		 	Vice President
					
	By:	 	/s/ Kenneth Wolf	 		 		 	
					
	Title:	 	CFO	 		 		 	

  

 -4-First Modification to Promissory Note

 Exhibit 10.39 
 FIRST MODIFICATION TO PROMISSORY NOTE 
 THIS MODIFICATION TO PROMISSORY NOTE (this “Modification”)
is entered into as of June 1, 2009, by and between NATURAL ALTERNATIVES INTERNATIONAL, INC. (“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 Revolving Line of Credit Note in the maximum principal amount of $7,500,000.00, executed by Borrower and payable to the order of Bank, dated as of November 1, 2008 (the “Note”), which Note is subject to
the terms and conditions of a loan agreement between Borrower and Bank dated as of May 1, 2004, as amended from time to time (the “Loan Agreement”), which Note incorporates the terms of an Addendum to Promissory Note dated as of the
same date (the “Addendum”). 
 WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in
the Note, and have agreed to modify the Note to reflect said changes. 
 NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the Note shall be modified as follows: 
 1. Paragraph
(b) under the section “DEFINITIONS” is hereby deleted in its entirety and the following substituted therefor: 
 “(b) Daily Three Month LIBOR” means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a three (3) month period.” 
 2. Paragraph (d)(i)(B) under the section “DEFINITIONS” is hereby deleted in its entirety and the following substituted therefor. 
 “(B) for the purpose of calculating effective rates of interest for loans making reference to the Daily Three Month LIBOR Rate, as
the Inter-Bank Market Offered Rate in effect for time to time for delivery of funds for three (3) months in amounts approximately equal to the principal amount of such loans.” 
 3. Paragraph (a) under the section “INTEREST” is hereby deleted in its entirety and the following substituted therefor: 
 “(a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year,
actual days elapsed) either (i) at a fluctuating rate per annum determined by Bank to be two and three-quarters percent (2.75%) above the Daily Three Month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum
determined by Bank to be two and one-half percent (2.50%) above LIBOR in effect on the first day of the applicable Fixed Rate Term. When interest is determined in relation to the Daily Three Month LIBOR Rate, each change in the interest rate
shall become effective each Business Day that the Bank determines that the Daily Three Month LIBOR Rate has changed. Bank is hereby authorized to 

  

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note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank’s books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.” 
 4. Paragraph (b) under the section “INTEREST” is hereby deleted in its entirety and the following substituted therefor: 
 “(b) Selection of Interest Rate Options. At any time any portion of this Note bears interest determined in relation to LIBOR
for a Fixed Rate Term, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Daily Three Month LIBOR Rate or to LIBOR for a new Fixed Rate
Term designated by Borrower. At any time any portion of this Note bears interest determined in relation to the Daily Three Month LIBOR Rate, Borrower may at any time convert all or a portion thereof so that it bears interest determined in relation
to LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to select an interest rate determined in relation to the Daily Three Month LIBOR Rate or a Fixed Rate Term for all or a portion
of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection for a Fixed Rate Term, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection
for a Fixed Rate Term, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the
first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a
fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Daily Three Month LIBOR Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.”

 5. Paragraph (c) under the section “BORROWING AND REPAYMENT” is hereby deleted in its entirety and the following
substituted therefor: 
 “(c) Application of Payments. Each payment made on this Note shall be credited first, to
any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Daily
Three Month LIBOR Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first.” 
  

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 6. Paragraph (a) under the section “PREPAYMENT” is hereby deleted in its entirety and the
following substituted therefor; 
 “(a) Daily Three Month LIBOR Rate. Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to the Daily Three Month LIBOR Rate at any time, in any amount and without penalty.” 
 7. The last paragraph under the section “PREPAYMENT” is hereby deleted in its entirety and the following substituted therefor: 
 “Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.
Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due,
the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.0%) above the Daily Three Month LIBOR Rate in effect from time to time (computed on the basis of a 360-day year, actual days
elapsed).” 
 8. The Addendum to Promissory Note attached amends and restates in its entirety the prior Addendum. 
 9. Except as expressly set forth herein, all terms and conditions of the Note remain in full force and effect, without waiver or modification. All terms
defined in the Note or the Loan Agreement shall have the same meaning when used in this Modification. This Modification and the Note shall be read together, as one document. 
 10. Borrower certifies that as of the date of this Modification there exists no Event of Default under the Note, 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. 
 IN WITNESS WHEREOF, the parties
hereto have caused this Modification to be executed as of the day and year first written above. 
  

									
	 NATURAL ALTERNATIVES
 INTERNATIONAL, INC.

	 		 	 WELLS FARGO BANK,
 NATIONAL
ASSOCIATION

					
	By:	 	/s/ Mark A. LeDoux	 		 	By:	 	/s/ Bernie Palmer
	Title:	 	CEO	 		 		 	Bernie Palmer
		 		 		 		 	Vice President
	By:	 	/s/ Kenneth Wolf	 		 		 	
	Title:	 	CFO	 		 		 	

  

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 AMENDED AND RESTATED 
 ADDENDUM TO PROMISSORY NOTE 
 (LIBOR PRICING ADJUSTMENTS) 
 THIS AMENDED AND RESTATED ADDENDUM dated as of June 1, 2009 is attached to and made a part of that certain promissory note executed by NATURAL
ALTERNATIVES INTERNATIONAL, INC. (“Borrower”) and payable to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), or order, dated as of November 1, 2008 in the principal amount of Seven Million Five Hundred Thousand Dollars
($7,500,000.00), as amended (the “Note”). The Amended and Restated Addendum to Promissory Note (LIBOR Pricing Adjustments) amends and restates in its entirety the prior Addendum to Promissory Note (LIBOR Pricing Adjustments). 

The following provisions are hereby incorporated into the Note to reflect the interest rate adjustments agreed to by Bank and Borrower: 
 INTEREST RATE ADJUSTMENTS: 
 (a) Initial LIBOR Margin.
The initial interest rates applicable to this Note shall be the rates set forth in the “Interest” paragraph herein. 
 (b) LIBOR
Rate Adjustments. Bank shall adjust the (a) annual fee, and (b) the LIBOR margin used to determine the rate of interest applicable to Daily Three Month LIBOR or the LIBOR option selected by Borrower under this Note on a quarterly
basis, commencing with Borrower’s fiscal quarter ending June 30, 2009, if required to reflect a change in Borrower’s ratio of Fixed Charge Coverage Ratio (as defined in the Credit Agreement referenced herein), in accordance with the
following grid: 
  

										
	 Fixed Charge Coverage Ratio
	  	Applicable
LIBOR
Margin	 	 	Applicable
Daily Three Month LIBOR
Margin	 	 	Annual
Fee
Margin	 
	 2.5 to 1.0 or greater
	  	2.50	% 	 	2.75	% 	 	0.25	% 
	 at least 1.75 to 1.00 but less than 2.5 to 1.0
	  	3.00	% 	 	3.25	% 	 	0.50	% 
	 at least 1.25 to 1.00 but less 1.75 to 1.00
	  	3.50	% 	 	3.75	% 	 	1.00	% 
	 less 1.25 to 1.00
	  	4.00	% 	 	4.25	% 	 	1.50	% 

 Each such adjustment shall be effective on the first Business Day of Borrower’s fiscal quarter following the
quarter during which Bank receives and reviews Borrower’s most current fiscal quarter-end financial statements in accordance with any requirements established by Bank for the preparation and delivery thereof. 
  

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 IN WITNESS WHEREOF, this Addendum has been executed as of the date hereof. NATURAL ALTERNATIVES
INTERNATIONAL, INC. 
  

			
	By:	 	/s/ Mark A. LeDoux
	Title:	 	CEO
		
	By:	 	/s/ Kenneth Wolf
	Title:	 	CFO

  

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