ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “ Agreement ”) is entered into as of August 4, 2008 (“Effective Date”), by and between MILES KIMBALL COMPANY, a Wisconsin corporation (“ Buyer ”), and REAL HEALTH LABORATORIES, INC., a California corporation (“ Seller ”) and a wholly-owned subsidiary of Natural Alternatives International, Inc., a Delaware corporation (“ Parent ”). Buyer and Seller may be referred to herein individually as a “ Party ” and collectively as the “ Parties .”

WHEREAS, Buyer desires to purchase from Seller certain assets used in (and assume certain of the liabilities of Seller related to) the Seller’s catalog and internet business conducted under the trademark “As We Change” (the “ Business ”); and

WHEREAS, Seller desires to sell to Buyer such assets and assign to Buyer such liabilities.

Now, therefore, in consideration of the foregoing premises and the mutual promises herein made and the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.

Section 1. Definitions . The definition of certain defined terms, not defined elsewhere in this Agreement, are:

“ Acquired Assets ” means all of Seller’s right, title, and interest in and to the following, and only the following, specified assets:

“ Acquired Intellectual Property ” means the Intellectual Property listed on Schedule 1 .

“ Acquired Inventory ” means the inventory of the Business that is listed on Schedule 2 (subject to modification for final month-end adjustments), which includes all inventory of the Business and inventories related to open purchase orders as of the Closing Date.

“ Acquired Prepaid Catalog Expenses ” means the unamortized expenses that are related to the production of catalogs for post August 4, 2008 future revenue streams.

“ Adverse Consequences ” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.

“ Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

“ Assumed Liabilities ” means the following, and only the following, liabilities of the Seller:

provided , however , that the term “ Assumed Liabilities ” shall not include any of the Excluded Liabilities.

“ Cash ” means cash and cash equivalents (including marketable securities and short-term investments).

“ Closing Date Net Asset Value ” means the Net Asset Value, as of 12:01 a.m., San Diego time, on the Closing Date.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Excluded Liabilities ” means any liability or obligation of Seller other than those set forth in the definition of “Assumed Liabilities”, including: (a) any liability arising out of or relating to the operation of the Business by Seller, including any liability relating to products manufactured or distributed by or for the Seller prior to the Closing Date; (b) any liability of Seller or any of Seller’s Affiliates for Taxes, including any liability of Seller or any of Seller’s Affiliates for Taxes as a result of Seller’s operation of the Business or Taxes payable by Seller or any of Seller’s Affiliates that will arise as a result of the sale of the Acquired Assets pursuant to this Agreement; (c) any liability of Seller or any of Seller’s Affiliates relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, health care plans or benefits or other employee plans or benefits of any kind for Seller’s employees or former employees or both, in every case arising out of and relating to Seller’s employment of such employees or former employees and including any liability of Seller under any employment, severance, retention or termination agreement with any employee of Seller or any of Seller’s Affiliates; (d) any liability of Seller under this Agreement or other document executed in connection with the transactions contemplated hereby; and (e) any liability of Seller based upon Seller’s acts or omissions occurring after the Closing.

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

“ Intellectual Property ” means: (a) customer names and history, (b) vendor names, (c) product cost history, (d) product performance, (e) customer performance, (f) campaign performance, (g) URLs and any Internet addresses, (h) hardcopy of historical catalogs, (i) telecom numbers, (j) creative catalog and internet assets, (k) trademarks, service marks, trade dress, logos, slogans, trade names, Internet domain names and telephone numbers, together with translations, adaptations, derivations, and combinations thereof and including goodwill associated therewith, and applications, registrations, and renewals in connection therewith, (l) websites, graphics, designs, labels, packaging and other copyrightable works, copyrights, and applications, registrations, and renewals in connection therewith, (m) product specifications, and confidential business information (including ideas, research and development, know-how, technical data, designs, drawings, specifications, and business and marketing plans and proposals), (n) advertising and promotional materials, (o) other proprietary rights, and (p) copies and tangible embodiments thereof (in whatever form or medium).

“ Knowledge ” means, with respect to any representation, warranty or statement of any Party in this Agreement that is qualified by such Party’s “knowledge,” the actual knowledge of such Party or such knowledge that a reasonably prudent officer, director, manager or employee should have if such Person duly performed his or her duties as an officer, director, manager or employee of such Party with due care; provided, however, that the foregoing shall not be construed to create a duty or obligation on any Person to engage in or conduct any inquiry or investigation, and provided further that Seller will be deemed to have Knowledge of a particular fact or other matter only if Randell Weaver, Ken Wolf or John Dullea has Knowledge of that fact or other matter, and Buyer will be deemed to have Knowledge of a particular fact or other matter only if Stan Krangle, Dana Gilman or Vicki Updike has Knowledge of that fact or other matter.

“ Net Asset Value ” means the difference between (a) the sum of the Acquired Inventory (not including any Acquired Inventory that is one hundred and eighty (180) days old or more) and Acquired Prepaid Catalog Expenses, and (b) the amount of the Assumed Liabilities.

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity or a governmental entity (or any department, agency, or political subdivision thereof).

“ Restricted Business ” means the production of a lifestyle catalog that substantially mirrors the As We Change ^® catalog in terms of products offered, marketing methods used and customers targeted; provided, however, that the foregoing shall not be construed in a manner such that it in any way limits or restricts the ability of Seller, its Parent or Affiliates from manufacturing, distributing or selling nutritional supplements or other nutraceutical, nutritional or skin care products, including by means of the production of a lifestyle catalog offering such products.

“ Tax ” or “ Taxes ” means any federal, state, local, or foreign taxes, charges, fees, imposts or other assessments, including those related to income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Section 2. Basic Transaction .

(a) Purchase and Sale of Assets . On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired Assets at the Closing for the consideration specified below in this Section 2 .

(b) Assumption of Liabilities . On and subject to the terms and conditions of this Agreement, Buyer agrees to assume and become responsible for all of the Assumed Liabilities at the Closing. Buyer will not assume or have any responsibility, however, with respect to any other obligation or liability of Seller not included within the definition of Assumed Liabilities.

(c) Purchase Price . The Buyer agrees to pay to the Seller $2,000,000 (the “ Purchase Price ”) in United States dollars, by delivery of cash in such amount, payable by wire transfer or delivery of other immediately available funds. Following the Closing, the Purchase Price is subject to adjustment as provided in Section 2(g) below.

(d) The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Bell, Boyd & Lloyd LLP, 3580 Carmel Mt. Road, Suite 200, San Diego, California commencing at 9:00 a.m. local time on the Effective Date following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or at such other time or place as the Parties may mutually determine (the “ Closing Date ”).

(e) Deliveries at the Closing . At the Closing, (i) Seller will deliver to Buyer the various certificates, instruments, and documents referred to in Section 6(a) below; (ii) Buyer will deliver to Seller the various certificates, instruments, and documents referred to in Section 6(b) below; (iii) Seller will execute, acknowledge (if appropriate), and deliver to Buyer (A) an Assignment and Bill of Sale in the form of Exhibit A , (B) a counterpart Trademark Assignment in the form attached hereto as Exhibit C , (C) a counterpart Instrument of Assumption in the form attached hereto as Exhibit B , and (C) such other instruments of sale, transfer, conveyance, and assignment as Buyer and its counsel may reasonably request; (iv) Buyer will execute, acknowledge (if

appropriate), and deliver to Seller (A) a counterpart Instrument of Assumption in the form attached hereto as Exhibit B , (B) a counterpart Trademark Assignment in the form attached hereto as Exhibit C , and (C) such other instruments of assumption as Seller and its counsel may reasonably request; and (v) Buyer will deliver to Seller the consideration specified in Section 2(c) above.

(f) Purchase Price Allocation . The Purchase Price is being allocated among the Acquired Assets by the Parties as set forth on Schedule 3 . Such allocation is intended to comply with the requirements of Section 1060 of the Code. Buyer shall prepare and deliver Internal Revenue Service (“ IRS ”) Form 8594 to Seller within forty-five (45) days after the Closing Date to be filed with the IRS, subject to Seller’s review and approval which shall not be unreasonably withheld. Seller and Buyer shall file Form 8594 with their respective timely-filed Tax Returns consistent with such allocation. The Parties shall treat and report the transaction contemplated by this Agreement in all respects consistently for purposes of any federal, state or local Tax, including the calculation of gain, loss and basis with reference to the Purchase Price allocation made pursuant to this Section 2(f) . The parties shall not take any action or position inconsistent with the obligations set forth in this Agreement. Seller agrees to indemnify and hold Buyer and its Affiliates harmless and Buyer hereby agrees to indemnify and hold Seller harmless, from and against any and all losses, liabilities and expenses (including additional income taxes and reasonable fees and disbursements of counsel) that may be incurred by the indemnified party as a result of the failure of the indemnifying party so to report the sale and purchase of the Acquired Assets as required by applicable laws.

(g) Net Asset Value Adjustment .

(i) Within thirty (30) days of the Closing, the Seller shall deliver to the Buyer an unaudited statement of the Closing Date Net Asset Value (the “ Closing Date Net Asset Value Statement ”). If the Closing Date Net Asset Value as shown on the Closing Date Net Asset Value Statement is less than $304,950, then the Purchase Price shall be decreased by an amount equal to the difference obtained by subtracting the amount of the Closing Date Net Asset Value from $304,950. If the Closing Date Net Asset Value as shown on the Closing Date Net Asset Value Statement is greater than $304,950, then the Purchase Price will be increased by an amount equal to the difference obtained by subtracting $304,950 from the amount of the Closing Date Net Asset Value.

(ii) If the Buyer disagrees with the Closing Date Net Asset Value as shown on the Closing Date Net Asset Value Statement, then as soon as practicable following the Closing Date (but not later than 30 days after the delivery thereof), the Buyer shall prepare and deliver to the Seller, its own statement of the Net Asset Value as of 12:01 a.m., San Diego time, on the Closing Date (the “ Buyer Closing Date Net Asset Value Statement ” and the Closing Date Net Asset Value as reflected on the Buyer Closing Date Net Asset Value Statement being referred to herein as the “ Buyer Determined Closing Date Net Asset Value ”). In preparing the Buyer Closing Date Net Asset Value Statement, the Buyer shall be entitled to have access to the books and records of the Seller and the work papers of the Seller prepared in connection with the preparation of the Closing Date Net Asset Value Statement and shall be entitled to discuss such books and records and work papers with the Seller and those persons responsible for the preparation thereof. In the event that in preparing the Buyer Closing Date Net Asset Value Statement the Buyer conducts a physical inventory, the Seller shall be entitled to have one or more

representatives present during the conduct of such physical inventory. In addition, if the Buyer does not object to the Closing Date Net Asset Value as shown on the Closing Date Net Asset Value Statement within the 30-day period referred to above, the Closing Date Net Asset Value as reflected on the Closing Date Net Asset Value Statement as so prepared shall be deemed final and conclusive and binding upon the Seller and the Buyer.

(iii) In the event the Seller does not agree with the Buyer Determined Closing Date Net Asset Value as reflected on the Buyer Closing Date Net Asset Value Statement, the Seller shall so inform the Buyer in writing within 30 days after the Seller’s receipt thereof, such writing to set forth the objections of the Seller in reasonable detail. If the Seller and the Buyer cannot reach agreement as to any disputed matter relating to the Closing Date Net Asset Value within 15 days after notification by the Seller to the Buyer of a dispute, they shall forthwith refer the dispute to a nationally recognized accounting firm mutually agreeable to the Seller and the Buyer for resolution, with the understanding that: (i) the Closing Date Net Asset Value, as finally determined by such firm, shall not be less than the amount thereof shown in Buyer’s Closing Date Net Asset Value Statement nor greater than the amount thereof shown in the Seller’s objection delivered pursuant to this clause (iii); and (ii) such firm shall resolve all disputed items within 20 days after such disputed items are referred to it. If the Buyer and the Seller are unable to agree on the choice of an accounting firm, then the Buyer and the Seller shall select a nationally recognized accounting firm by lot (after excluding their respective regular outside accounting firms). The decision of any such accounting firm under this clause (iii) with respect to all disputed matters relating to the Closing Date Net Asset Value shall be deemed final and conclusive and shall be binding upon the Seller and the Buyer. In addition, if the Seller does not object to the Buyer Determined Closing Date Net Asset Value within the 30-day period referred to above, the Buyer Determined Closing Date Net Asset Value as reflected on the Buyer Closing Date Net Asset Value Statement as so prepared shall be deemed final and conclusive and binding upon the Seller and the Buyer.

(iv) The Seller shall be entitled to have access to the books and records of the Buyer and the work papers of the Buyer prepared in connection with the preparation of the Buyer Closing Date Net Asset Value Statement and shall be entitled to discuss such books and records and work papers with the Buyer and those persons responsible for the preparation thereof. The accounting firm selected pursuant to Section 2(g)(iii) shall be entitled to have access to the books and records of the Buyer and the Seller and the work papers of the Buyer and the Seller prepared in connection with the preparation of the Closing Date Net Asset Value Statement and the Buyer Closing Date Net Asset Value Statement and shall be entitled to discuss such books and records and work papers with the Buyer and the Seller and those persons responsible for the preparation thereof.

(v)

(A) If the Closing Date Net Asset Value as finally determined pursuant to this Section 2(g) (the “ Final Closing Date Net Asset Value ”) exceeds $304,950 (such excess, if any, being referred to herein as the “ Finally Determined Excess ”) then the Buyer shall pay such amount by wire transfer to an account designated by the Seller within five (5) business days after the date upon which the Closing Date Net Asset Value is deemed final and conclusive pursuant hereto.

(B) If the Final Closing Date Net Asset Value is less than $304,950 (such shortfall, if any, being referred to herein as the “ Finally Determined Shortfall ”) then the Seller shall pay such amount by wire transfer to an account designated by the Buyer within five (5) business days after the date upon which the Closing Date Net Asset Value is deemed final and conclusive pursuant hereto.

(vi) If the Final Closing Date Net Asset Value is determined by an accounting firm under Section 2(g)(iii) , and such determination results in a payment to the Seller, then the Buyer shall pay the aggregate fees and expenses of the accounting firm selected to finally determine the Closing Date Net Asset Value. If the Final Closing Date Net Asset Value is determined by an accounting firm under Section 2(g)(iii) , and such determination results in a payment to the Buyer that is greater than the payment that would have been required to have been made to Buyer based on the Closing Date Net Asset Value Statement, or results in no payment to Buyer or Seller where a payment to Seller would have been required to have been made to Seller based on the Closing Date Net Asset Value Statement, then the Seller shall pay the aggregate fees and expenses of the accounting firm selected to finally determine the Closing Date Net Asset Value.

Section 3. Seller’s Representations and Warranties . Seller represents and warrants to Buyer that the statements contained in this Section 3 are correct and complete as of the Effective Date and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the Effective Date throughout this Section 3 ), except as set forth in the disclosure schedule accompanying this Agreement (the “ Disclosure Schedule ”). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3 and the other sections of this Agreement pursuant to which disclosure is made or items are referred to in the Disclosure Schedule.

(a) Organization of Seller . Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, with full corporate power and authority to conduct the Business as now being conducted by it, and to own and use the properties it purports to own and use in the conduct of the Business.

(b) Authorization of Transaction . Seller has full corporate power and authority to execute and deliver this Agreement and the documents contemplated hereby (the “ Transaction Documents ”) and to perform its obligations thereunder. This Agreement constitutes, and the other Transaction Documents when executed will constitute, the valid and legally binding obligation of Seller, enforceable against it in accordance with its terms and conditions, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws of general application affecting enforcement of creditors’ rights generally. The execution, delivery and performance of the Transaction Documents by Seller have been duly authorized by all necessary action of Seller’s shareholder and board of directors.

(c) Non-contravention . Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Seller or the Acquired Assets are subject or any provision of the charter or bylaws of Seller, or (ii) except as set forth in Schedule 3(c) of Seller’s Disclosure Schedule, conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Seller is a party or by which it is bound or to which any of the Acquired Assets is subject (or result in the imposition of any lien upon any of the Acquired Assets). Except as set forth in Schedule 3(c) of Seller’s Disclosure Schedule, the Seller does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above).

(d) Brokers’ Fees . Except as set forth in Schedule 3(d) of Seller’s Disclosure Schedule, Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

(e) Title to Assets . Except as set forth in Schedule 3(e) of Seller’s Disclosure Schedule, Seller has good title to the Acquired Assets, free and clear of any liens or restriction on transfer, and Seller has the right to transfer the Acquired Assets to Buyer, free and clear of any liens.

(f) Selected Financial Data . Attached hereto as Exhibit D are the following financial data (the “ Selected Financial Data ”):

(i) the value of the Acquired Inventory as of June 30, 2008;

(ii) the value of the Acquired Prepaid Catalog Expenses as of June 30, 2008; and

(iii) the obligations of the Seller in respect of the Assumed Liabilities, as of June 30, 2008.

Except as set forth on Schedule 3(f) of Seller’s Disclosure Schedule, the Selected Financial Data fairly present the values, obligations and expenses set forth therein and are based upon the books and records of the Seller, which have been maintained in accordance with GAAP.

(g) Acquired Intellectual Property .

(i) Except as set forth on Schedule 3(g)(i) of Seller’s Disclosure Schedule, to Seller’s Knowledge: (a) no third party has interfered with, infringed upon, misappropriated, or violated the Acquired Intellectual Property; (b) no Acquired Intellectual Property interferes with, infringes upon or violates the intellectual property rights of any third-party; (c) no copyrighted or copyrightable material included in the Acquired Intellectual Property infringes upon or violates the copyrights of any third party; and (d) no know-how, process, or product included in the Acquired Intellectual Property violates any trade secret of any third party.

(ii) Schedule 3(g)(ii) of the Disclosure Schedule identifies: (a) each license, agreement, or other perm